[Title 30 CFR ]
[Code of Federal Regulations (annual edition) - July 1, 1997 Edition]
[From the U.S. Government Publishing Office]


[[Page i]]

          30



          Mineral Resources




          PARTS 200 TO 699

          Revised as of July 1, 1997
          CONTAINING
          A CODIFICATION OF DOCUMENTS
          OF GENERAL APPLICABILITY
          AND FUTURE EFFECT

          AS OF JULY 1, 1997
          With Ancillaries
          Published by
          the Office of the Federal Register
          National Archives and Records
          Administration

          as a Special Edition of
          the Federal Register



[[Page ii]]

                                      




                     U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 1997



               For sale by U.S. Government Printing Office
 Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328



[[Page iii]]




                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 30:
    Chapter II--Minerals Management Service, Department of the 
        Interior..............................................       3
    Chapter III--Board of Surface Mining and Reclamation 
        Appeals, Department of the Interior...................     503
    Chapter IV--Geological Survey, Department of the Interior.     505
    Chapter VI--Bureau of Mines, Department of the Interior...     515
  Finding Aids:
    Material Approved for Incorporation by Reference..........     541
    Table of CFR Titles and Chapters..........................     551
    Alphabetical List of Agencies Appearing in the CFR........     567
    Redesignation Table.......................................     577
    List of CFR Sections Affected.............................     581

[[Page iv]]



      



                                                                                                                
                                  ----------------------------------------------------------                    

   Cite this Code:  CFR                                                         
                                                                                                                
   To cite the regulations in this volume use title, part                       
   and section number. Thus, 30 CFR 201.100 refers to                          
   title 30, part 201, section 100.                                            
                                  ----------------------------------------------------------                    
                                                                                                                


[[Page v]]

                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1
    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, July 1, 1997), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

    Each volume of the Code contains amendments published in the Federal 
Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
number of the Federal Register and date of publication. Publication 
dates and effective dates are usually not the same and care must be 
exercised by the user in determining the actual effective date. In 
instances where the effective date is beyond the cut-off date for the 
Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
states a date certain for expiration, an appropriate note will be 
inserted following the text.

OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
placed as close as possible to the applicable recordkeeping or reporting 
requirements.

OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
the cover of each volume are not carried. Code users may find the text 
of provisions in effect on a given date in the past by using the 
appropriate numerical list of sections affected. For the period before 
January 1, 1986, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, or 1973-1985, published in seven separate volumes. For 
the period beginning January 1, 1986, a ``List of CFR Sections 
Affected'' is published at the end of each CFR volume.

INCORPORATION BY REFERENCE

    What is incorporation by reference? Incorporation by reference was 
established by statute and allows Federal agencies to meet the 
requirement to publish regulations in the Federal Register by referring 
to materials already published elsewhere. For an incorporation to be 
valid, the Director of the Federal Register must approve it. The legal 
effect of incorporation by reference is that the material is treated as 
if it were published in full in the Federal Register (5 U.S.C. 552(a)). 
This material, like any other properly issued regulation, has the force 
of law.
    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
    Properly approved incorporations by reference in this volume are 
listed in the Finding Aids at the end of this volume.
    What if the material incorporated by reference cannot be found? If 
you have any problem locating or obtaining a copy of material listed in 
the Finding Aids of this volume as an approved incorporation by 
reference, please contact the agency that issued the regulation 
containing that incorporation. If, after contacting the agency, you find 
the material is not available, please notify the Director of the Federal 
Register, National Archives and Records Administration, Washington DC 
20408, or call (202) 523-4534.

CFR INDEXES AND TABULAR GUIDES

    A subject index to the Code of Federal Regulations is contained in a 
separate volume, revised annually as of January 1, entitled CFR Index 
and Finding Aids. This volume contains the Parallel Table of Statutory 
Authorities and Agency Rules (Table I), and Acts Requiring Publication 
in the Federal Register (Table II). A list of CFR titles, chapters, and 
parts and an alphabetical list of agencies publishing in the CFR are 
also included in this volume.
    An index to the text of ``Title 3--The President'' is carried within 
that volume.
    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.

[[Page vii]]

    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

REPUBLICATION OF MATERIAL

    There are no restrictions on the republication of material appearing 
in the Code of Federal Regulations.

INQUIRIES

    For a legal interpretation or explanation of any regulation in this 
volume, contact the issuing agency. The issuing agency's name appears at 
the top of odd-numbered pages.
    For inquiries concerning CFR reference assistance, call 202-523-5227 
or write to the Director, Office of the Federal Register, National 
Archives and Records Administration, Washington, DC 20408.
SALES

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Customer Service call 202-512-1803.

                              Raymond A. Mosley,
                                    Director,
                          Office of the Federal Register.

July 1, 1997.



[[Page ix]]



                               THIS TITLE

    Title 30--Mineral Resources is composed of three volumes. The parts 
in these volumes are arranged in the following order: parts 1 to 199, 
parts 200 to 699, and part 700 to End. The contents of these volumes 
represent all current regulations codified under this title of the CFR 
as of July 1, 1997.

    Redesignation tables appear in the first and second volumes of title 
30.

    For this volume, Karen A. Thornton was Chief Editor. The Code of 
Federal Regulations publication program is under the direction of 
Frances D. McDonald, assisted by Alomha S. Morris.

[[Page x]]



 
[[Page 1]]



                       TITLE 30--MINERAL RESOURCES




                  (This book contains parts 200 to 699)

  --------------------------------------------------------------------
                                                                    Part
Chapter ii--Minerals Management Service, Department of the 
  Interior..................................................         201
Chapter iii--Board of Surface Mining and Reclamation 
  Appeals, Department of the Interior.......................         301
Chapter iv--Geological Survey, Department of the Interior...         401
Chapter vi--Bureau of Mines, Department of the Interior.....         515

Cross References:

Bureau of Land Management, Department of the Interior, regulations with 
  respect to mineral lands: 43 CFR, chapter II, subchapter C.
Foreign Trade Statistics, Bureau of the Census, Department of Commerce: 
  15 CFR part 30.
Forest Service regulations relating to mineral developments and mining 
  in national forests: 36 CFR part 228.
General Services Administration regulations for stockpiling of strategic 
  and critical materials: 41 CFR chapter 101, subchapter C.
Interstate Commerce Commission: 49 CFR chapter X.
Bureau of Indian Affairs, Department of the Interior, energy and 
  minerals regulations: 25 CFR chapter I, subchapter I.

  Editorial Note: Other regulations issued by the Department of the 
Interior appear in title 25, chapters I and II; title 36, chapter I; 
title 41, chapter 114; title 43; and title 50, chapters I and IV.

[[Page 3]]



CHAPTER II--MINERALS MANAGEMENT SERVICE, DEPARTMENT OF THE INTERIOR




                           (Parts 200 to 699)

  --------------------------------------------------------------------

                    SUBCHAPTER A--ROYALTY MANAGEMENT

Part                                                                Page
201             General.....................................           5
202             Royalties...................................           5
203             Relief or reduction in royalty rates........          11
206             Product valuation...........................          23
207             Sales agreements or contracts governing the 
                    disposal of lease products..............         126
208             Sale of Federal royalty oil.................         128
210             Forms and reports...........................         136
212             Records and files maintenance...............         144
215       Accounting and auditing standards [Reserved]
216             Production accounting.......................         146
217             Audits and inspections......................         153
218             Collection of royalties, rentals, bonuses 
                    and other monies due the Federal 
                    Government..............................         154
219             Distribution and disbursement of royalties, 
                    rentals, and bonuses....................         168
220             Accounting procedures for determining net 
                    profit share payment for outer 
                    Continental Shelf oil and gas leases....         169
228             Cooperative activities with States and 
                    Indian tribes...........................         182
229             Delegation to States........................         186
230             Recoupments and refunds.....................         193
232       Interest payments [Reserved]
233       Escrow and investments [Reserved]
234       Bonding--payment liability [Reserved]
241             Penalties...................................         200
242       Notices and orders [Reserved]

[[Page 4]]

243             Appeals--Royalty management program.........         203
                         SUBCHAPTER B--OFFSHORE

250             Oil and gas and sulphur operations in the 
                    Outer Continental Shelf.................         208
251             Geological and geophysical (G & G) 
                    explorations of the Outer Continental 
                    Shelf...................................         387
252             Outer Continental Shelf (OCS) oil and gas 
                    information program.....................         402
254             Oil-spill response requirements for 
                    facilities located seaward of the coast 
                    line....................................         408
256             Leasing of sulphur or oil and gas in the 
                    Outer Continental Shelf.................         420
259             Mineral leasing: Definitions................         450
260             Outer Continental Shelf oil and gas leasing.         450
270             Nondiscrimination in the Outer Continental 
                    Shelf...................................         457
280             Prospecting for minerals other than oil, 
                    gas, and sulfur in the outer continental 
                    shelf...................................         458
281             Leasing of minerals other than oil, gas, and 
                    sulphur in the outer continental shelf..         465
282             Operations in the outer continental shelf 
                    for minerals other than oil, gas, and 
                    sulphur.................................         478
                          SUBCHAPTER C--APPEALS

290             Appeals procedures..........................         501

[[Page 5]]



                    SUBCHAPTER A--ROYALTY MANAGEMENT





PART 201--GENERAL--Table of Contents




                Subpart A--General Provisions [Reserved]

               Subpart B--Oil and Gas, General [Reserved]

                     Subpart C--Oil and Gas, Onshore

Sec.
201.100  Responsibilities of the Associate Director for Royalty 
          Management.

          Subpart D--Oil, Gas and Sulphur, Offshore [Reserved]

                       Subpart E--Coal [Reserved]

               Subpart F--Other Solid Minerals [Reserved]

               Subpart G--Geothermal Resources [Reserved]

                   Subpart H--Indian Lands [Reserved]

    Authority: The Act of February 25, 1920 (30 U.S.C. 181, et seq.), as 
amended; the Act of May 21, 1930 (30 U.S.C. 301-306); the Mineral 
Leasing Act for Acquired Lands (30 U.S.C. 351-359), as amended; the Act 
of March 3, 1909 (25 U.S.C. 396), as amended; the National Environmental 
Policy Act of 1969 (42 U.S.C. 4321, et seq.) as amended; the Act of May 
11, 1938 (25 U.S.C. 396a-396q), as amended; the Act of February 28, 1891 
(25 U.S.C. 397), as amended; the Act of May 29, 1924 (25 U.S.C. 398); 
the Act of March 3, 1927 (25 U.S.C. 398a-398e); the Act of June 30, 1919 
(25 U.S.C. 399), as amended; R.S. Sec. 441 (43 U.S.C. 1457), see also 
Attorney General's Opinion of April 2, 1941 (40 Op. Atty. Gen. 41); the 
Federal Property and Administrative Services Act of 1949 (40 U.S.C. 471, 
et seq.), as amended; the National Environmental Policy Act of 1969 (42 
U.S.C. 4321 et seq.), as amended; the Act of December 12, 1980 (Pub. L. 
96-514, 94 Stat. 2964); the Combined Hydrocarbon Leasing Act of 1981 
(Pub. L. 97-78, 95 Stat. 1070); the Outer Continental Shelf Lands Act 
(43 U.S.C. 1331, et seq.), as amended; section 2 of Reorganization Plan 
No. 3 of 1950 (64 stat. 1262); Secretarial Order No. 3071 of January 19, 
1982, as amended; and Secretarial Order 3087, as amended.



                Subpart A--General Provisions [Reserved]



               Subpart B--Oil and Gas, General [Reserved]



                     Subpart C--Oil and Gas, Onshore



Sec. 201.100  Responsibilities of the Associate Director for Royalty Management.

    The Associate Director is responsible for the collection of certain 
rents, royalties, and other payments; for the receipt of sales and 
production reports; for determining royalty liability; for maintaining 
accounting records; for any audits of the royalty payments and 
obligations; and for any and all other functions relating to royalty 
management on Federal and Indian oil and gas leases.

[47 FR 47768, Oct. 27, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983]



          Subpart D--Oil, Gas and Sulphur, Offshore [Reserved]



                       Subpart E--Coal [Reserved]



               Subpart F--Other Solid Minerals [Reserved]



               Subpart G--Geothermal Resources [Reserved]



                   Subpart H--Indian Lands [Reserved]



PART 202--ROYALTIES--Table of Contents




                Subpart A--General Provisions [Reserved]

              Subpart B--Oil, Gas, and OCS Sulfur, General

Sec.
202.51  Scope and definitions.
202.52  Royalties.

[[Page 6]]

202.53  Minimum royalty.

                    Subpart C--Federal and Indian Oil

202.100  Royalty on oil.
202.101  Standards for reporting and paying royalties.

                    Subpart D--Federal and Indian Gas

202.150  Royalty on gas.
202.151  Royalty on processed gas.
202.152  Standards for reporting and paying royalties on gas.

              Subpart E--Solid Minerals, General [Reserved]

                             Subpart F--Coal

202.250  Overriding royalty interest.

               Subpart G--Other Solid Minerals [Reserved]

                     Subpart H--Geothermal Resources

202.350  Scope and definitions.
202.351  Royalties on geothermal resources.
202.352  Minimum royalty.
202.353  Measurement standards for reporting and paying royalties.

                    Subpart I--OCS Sulfur [Reserved]

    Authority: 5 U.S.C. 301 et seq.; 25 U.S.C. 396 et seq., 396a et 
seq., 2101 et seq.; 30 U.S.C. 181 et seq., 351 et seq., 1001 et seq.; 
1701 et seq.; 31 U.S.C. 9701; 43 U.S.C. 1301 et seq.; 1331 et seq., 1801 
et seq.



                Subpart A--General Provisions [Reserved]



              Subpart B--Oil, Gas, and OCS Sulfur, General

    Source: 53 FR 1217, Jan. 15, 1988, unless otherwise noted.



Sec. 202.51  Scope and definitions.

    (a) This subpart is applicable to Federal and Indian (Tribal and 
allotted) oil and gas leases (except leases on the Osage Indian 
Reservation, Osage County, Oklahoma) and OCS sulfur leases.
    (b) The definitions in subparts C, D, and I of part 206 of this 
title are applicable to subparts B, C, D, and I of this part.



Sec. 202.52  Royalties.

    (a) Royalties on oil, gas, and OCS sulfur shall be at the royalty 
rate specified in the lease, unless the Secretary, pursuant to the 
provisions of the applicable mineral leasing laws, reduces, or in the 
case of OCS leases, reduces or eliminates, the royalty rate or net 
profit share set forth in the lease.
    (b) For purposes of this subpart, the use of the term royalty(ies) 
includes the term net profit share(s).



Sec. 202.53  Minimum royalty.

    For leases that provide for minimum royalty payments, the lessee 
shall pay the minimum royalty as specified in the lease.



                    Subpart C--Federal and Indian Oil



Sec. 202.100  Royalty on oil.

    (a) Royalties due on oil production from leases subject to the 
requirements of this part, including condensate separated from gas 
without processing, shall be at the royalty rate established by the 
terms of the lease. Royalty shall be paid in value unless MMS requires 
payment in-kind. When paid in value, the royalty due shall be the value, 
for royalty purposes, determined pursuant to part 206 of this title 
multiplied by the royalty rate in the lease.
    (b)(1) All oil (except oil unavoidably lost or used on, or for the 
benefit of, the lease, including that oil used off-lease for the benefit 
of the lease when such off-lease use is permitted by the MMS or BLM, as 
appropriate) produced from a Federal or Indian lease to which this part 
applies is subject to royalty.
    (2) When oil is used on, or for the benefit of, the lease at a 
production facility handling production from more than one lease with 
the approval of the MMS or BLM, as appropriate, or at a production 
facility handling unitized or communitized production, only that 
proportionate share of each lease's production (actual or allocated) 
necessary to operate the production facility may be used royalty-free.
    (3) Where the terms of any lease are inconsistent with this section, 
the lease terms shall govern to the extent of that inconsistency.

[[Page 7]]

    (c) If BLM determines that oil was avoidably lost or wasted from an 
onshore lease, or that oil was drained from an onshore lease for which 
compensatory royalty is due, or if MMS determines that oil was avoidably 
lost or wasted from an offshore lease, then the value of that oil shall 
be determined in accordance with 30 CFR part 206.
    (d) If a lessee receives insurance compensation for unavoidably lost 
oil, royalties are due on the amount of that compensation. This 
paragraph shall not apply to compensation through self-insurance.
    (e)(1) In those instances where the lessee of any lease committed to 
a federally approved unitization or communitization agreement does not 
actually take the proportionate share of the agreement production 
attributable to its lease under the terms of the agreement, the full 
share of production attributable to the lease under the terms of the 
agreement nonetheless is subject to the royalty payment and reporting 
requirements of this title. Except as provided in paragraph (e)(2) of 
this section, the value, for royalty purposes, of production 
attributable to unitized or communitized leases will be determined in 
accordance with 30 CFR part 206. In applying the requirements of 30 CFR 
part 206, the circumstances involved in the actual disposition of the 
portion of the production to which the lessee was entitled but did not 
take shall be considered as controlling in arriving at the value, for 
royalty purposes, of that portion as though the person actually selling 
or disposing of the production were the lessee of the Federal or Indian 
lease.
    (2) If a Federal or Indian lessee takes less than its proportionate 
share of agreement production, upon request of the lessee MMS may 
authorize a royalty valuation method different from that required by 
paragraph (e)(1) of this section, but consistent with the purposes of 
these regulations, for any volumes not taken by the lessee but for which 
royalties are due.
    (3) For purposes of this subchapter, all persons actually taking 
volumes in excess of their proportionate share of production in any 
month under a unitization or communitization agreement shall be deemed 
to have taken ratably from all persons actually taking less than their 
proportionate share of the agreement production for that month.
    (4) If a lessee takes less than its proportionate share of agreement 
production for any month but royalties are paid on the full volume of 
its proportionate share in accordance with the provisions of this 
section, no additional royalty will be owed for that lease for prior 
periods when the lessee subsequently takes more than its proportionate 
share to balance its account or when the lessee is paid a sum of money 
by the other agreement participants to balance its account.
    (f) For production from Federal and Indian leases which are 
committed to federally-approved unitization or communitization 
agreements, upon request of a lessee MMS may establish the value of 
production pursuant to a method other than the method required by the 
regulations in this title if: (1) The proposed method for establishing 
value is consistent with the requirements of the applicable statutes, 
lease terms, and agreement terms; (2) persons with an interest in the 
agreement, including, to the extent practical, royalty interests, are 
given notice and an opportunity to comment on the proposed valuation 
method before it is authorized; and (3) to the extent practical, persons 
with an interest in a Federal or Indian lease committed to the 
agreement, including royalty interests, must agree to use the proposed 
method for valuing production from the agreement for royalty purposes.

[53 FR 1217, Jan. 15, 1988]



Sec. 202.101  Standards for reporting and paying royalties.

    Oil volumes are to be reported in barrels of clean oil of 42 
standard U.S. gallons (231 cubic inches each) at 60 deg.F. When 
reporting oil volumes for royalty purposes, corrections must have been 
made for Basic Sediment and Water (BS&W) and other impurities. Reported 
American Petroleum Institute (API) oil gravities are to be those 
determined in accordance with standard industry procedures after 
correction to 60 deg.F.

[53 FR 1217, Jan. 15, 1988]

[[Page 8]]



                    Subpart D--Federal and Indian Gas

    Source: 53 FR 1271, Jan. 15, 1988, unless otherwise noted.



Sec. 202.150  Royalty on gas.

    (a) Royalties due on gas production from leases subject to the 
requirements of this subpart, except helium produced from Federal 
leases, shall be at the rate established by the terms of the lease. 
Royalty shall be paid in value unless MMS requires payment in kind. When 
paid in value, the royalty due shall be the value, for royalty purposes, 
determined pursuant to 30 CFR part 206 of this title multiplied by the 
royalty rate in the lease.
    (b)(1) All gas (except gas unavoidably lost or used on, or for the 
benefit of, the lease, including that gas used off-lease for the benefit 
of the lease when such off-lease use is permitted by the MMS or BLM, as 
appropriate) produced from a Federal or Indian lease to which this 
subpart applies is subject to royalty.
    (2) When gas is used on, or for the benefit of, the lease at a 
production facility handling production from more than one lease with 
the approval of MMS or BLM, as appropriate, or at a production facility 
handling unitized or communitized production, only that proportionate 
share of each lease's production (actual or allocated) necessary to 
operate the production facility may be used royalty free.
    (3) Where the terms of any lease are inconsistent with this subpart, 
the lease terms shall govern to the extent of that inconsistency.
    (c) If BLM determines that gas was avoidably lost or wasted from an 
onshore lease, or that gas was drained from an onshore lease for which 
compensatory royalty is due, or if MMS determines that gas was avoidably 
lost or wasted from an OCS lease, then the value of that gas shall be 
determined in accordance with 30 CFR part 206.
    (d) If a lessee receives insurance compensation for unavoidably lost 
gas, royalties are due on the amount of that compensation. This 
paragraph shall not apply to compensation through self-insurance.
    (e)(1) In those instances where the lessee of any lease committed to 
a Federally approved unitization or communitization agreement does not 
actually take the proportionate share of the production attributable to 
its Federal or Indian lease under the terms of the agreement, the full 
share of production attributable to the lease under the terms of the 
agreement nonetheless is subject to the royalty payment and reporting 
requirements of this title. Except as provided in paragraph (e)(2) of 
this section, the value for royalty purposes of production attributable 
to unitized or communitized leases will be determined in accordance with 
30 CFR part 206. In applying the requirements of 30 CFR part 206, the 
circumstances involved in the actual disposition of the portion of the 
production to which the lessee was entitled but did not take shall be 
considered as controlling in arriving at the value for royalty purposes 
of that portion, as if the person actually selling or disposing of the 
production were the lessee of the Federal or Indian lease.
    (2) If a Federal or Indian lessee takes less than its proportionate 
share of agreement production, upon request of the lessee MMS may 
authorize a royalty valuation method different from that required by 
paragraph (e)(1) of this section, but consistent with the purpose of 
these regulations, for any volumes not taken by the lessee but for which 
royalties are due.
    (3) For purposes of this subchapter, all persons actually taking 
volumes in excess of their proportionate share of production in any 
month under a unitization or communitization agreement shall be deemed 
to have taken ratably from all persons actually taking less than their 
proportionate share of the agreement production for that month.
    (4) If a lessee takes less than its proportionate share of agreement 
production for any month but royalties are paid on the full volume of 
its proportionate share in accordance with the provisions of this 
section, no additional royalty will be owed for that lease for prior 
periods at the time the lessee subsequently takes more than its 
proportionate share to balance its account or when the lessee is paid a 
sum of

[[Page 9]]

money by the other agreement participants to balance its account.
    (f) For production from Federal and Indian leases which are 
committed to federally-approved unitization or communitization 
agreements, upon request of a lessee MMS may establish the value of 
production pursuant to a method other than the method required by the 
regulations in this title if: (1) The proposed method for establishing 
value is consistent with the requirements of the applicable statutes, 
lease terms and agreement terms; (2) to the extent practical, persons 
with an interest in the agreement, including royalty interests, are 
given notice and an opportunity to comment on the proposed valuation 
method before it is authorized; and (3) to the extent practical, persons 
with an interest in a Federal or Indian lease committed to the 
agreement, including royalty interests, must agree to use the proposed 
method for valuing production from the agreement for royalty purposes.



Sec. 202.151  Royalty on processed gas.

    (a)(1) A royalty, as provided in the lease, shall be paid on the 
value of:
    (i) Any condensate recovered downstream of the point of royalty 
settlement without resorting to processing; and
    (ii) Residue gas and all gas plant products resulting from 
processing the gas produced from a lease subject to this subpart.
    (2) MMS shall authorize a processing allowance for the reasonable, 
actual costs of processing the gas produced from Federal and Indian 
leases. Processing allowances shall be determined in accordance with 30 
CFR part 206 subpart D for gas production from Federal leases and 30 CFR 
part 206 subpart E for gas production from Indian leases.
    (b) A reasonable amount of residue gas shall be allowed royalty free 
for operation of the processing plant, but no allowance shall be made 
for boosting residue gas or other expenses incidental to marketing, 
except as provided in 30 CFR part 206. In those situations where a 
processing plant processes gas from more than one lease, only that 
proportionate share of each lease's residue gas necessary for the 
operation of the processing plant shall be allowed royalty free.
    (c) No royalty is due on residue gas, or any gas plant product 
resulting from processing gas, which is reinjected into a reservoir 
within the same lease, unit area, or communitized area, when the 
reinjection is included in a plan of development or operations and the 
plan has received BLM or MMS approval for onshore or offshore 
operations, respectively, until such time as they are finally produced 
from the reservoir for sale or other disposition off-lease.

[53 FR 1217, Jan. 15, 1988, as amended at 61 FR 5490, Feb. 12, 1996]



Sec. 202.152  Standards for reporting and paying royalties on gas.

    (a)(1) Gas volumes and Btu heating values, if applicable, shall be 
determined under the same degree of water saturation. Gas volumes shall 
be reported in units of one thousand cubic feet (mcf), and Btu heating 
value shall be reported at a rate of Btu's per cubic foot, at a standard 
pressure base of 14.73 pounds per square inch absolute (psia) and a 
standard temperature base of 60  deg.F, except that for OCS leases in 
the Gulf of Mexico, gas volumes and Btu heating values shall be reported 
at a standard pressure base of 15.025 psia and a standard temperature 
base of 60  deg.F. Gas volumes and Btu heating values shall be reported, 
for royalty purposes, on the same water vapor saturated or unsaturated 
basis prescribed by Federal Energy Regulatory Commission (FERC) 
regulation, or on the basis prescribed in the lessee's gas sales 
contract provided that the sales contract does not conflict with FERC 
regulation.
    (2) The frequency and method of Btu measurement as set forth in the 
lessee's contract shall be used to determine Btu heating values for 
reporting purposes. However, the lessee shall measure the Btu value at 
least semiannually by recognized standard industry testing methods even 
if the lessee's contract provides for less frequent measurement.
    (b)(1) Residue gas and gas plant product volumes shall be reported 
as specified in this paragraph.
    (2) Carbon dioxide (CO2), nitrogen (N2), 
helium (He), residue gas, and any

[[Page 10]]

other gas marketed as a separate product shall be reported by using the 
same standards specified in paragraph (a) of this section.
    (3) Natural gas liquids (NGL) volumes shall be reported in standard 
U.S. gallons (231 cubic inches) at 60  deg.F.
    (4) Sulfur (S) volumes shall be reported in long tons (2,240 
pounds).



              Subpart E--Solid Minerals, General [Reserved]



                             Subpart F--Coal



Sec. 202.250  Overriding royalty interest.

    The regulations governing overriding royalty interests, production 
payments, or similar interests created under Federal coal leases are in 
43 CFR group 3400.

[54 FR 1522, Jan. 13, 1989]



               Subpart G--Other Solid Minerals [Reserved]



                     Subpart H--Geothermal Resources

    Source: 56 FR 57275, Nov. 8, 1991, unless otherwise noted.



Sec. 202.350   Scope and definitions.

    (a) This subpart is applicable to all geothermal resources produced 
from Federal geothermal leases issued pursuant to the Geothermal Steam 
Act of 1970, as amended (30 U.S.C. 1001 et seq.).
    (b) The definitions in 30 CFR 206.351 are applicable to this 
subpart.



Sec. 202.351  Royalties on geothermal resources.

    (a) Royalties on geothermal resources, including byproduct minerals 
and commercially demineralized water, shall be at the royalty rate(s) 
specified in the lease, unless the Secretary of the Interior temporarily 
waives, suspends, or reduces that rate(s). Royalties shall be paid in 
value. The royalty due shall be the value determined pursuant to subpart 
H of 30 CFR part 206 multiplied by the royalty rate in the lease.
    (b)(1) Royalties are due on all geothermal resources, except those 
specified in paragraph (b)(2) of this section, that are produced from a 
lease and are sold or utilized by the lessee or are reasonably 
susceptible to sale or utilization by the lessee.
    (2) Geothermal resources that are unavoidably lost, as determined by 
the Bureau of Land Management (BLM), and geothermal resources that are 
reinjected prior to use on or off the lease, as approved by BLM, are not 
subject to royalty. The Minerals Management Service (MMS) will allow 
free of royalty a reasonable amount of geothermal energy necessary to 
generate electricity for internal powerplant operations or to generate 
electricity returned to the lease for lease operations. If a powerplant 
uses geothermal production from more than one lease, or uses unitized or 
communitized production, only that proportionate share of each lease's 
production (actual or allocated) necessary to operate the powerplant may 
be used royalty free. The MMS will also allow free of royalty a 
reasonable amount of commercially demineralized water necessary for 
powerplant operations or otherwise used on or for the benefit of the 
lease.
    (3) Royalties on byproducts are due at the time the recovered 
byproduct is used, sold, or otherwise finally disposed of. Byproducts 
produced and added to stockpiles or inventory do not require payment of 
royalty until the byproducts are sold, utilized, or otherwise finally 
disposed of. The MMS may ask BLM to increase the lease bond to protect 
the lessor's interest when BLM determines that stockpiles or inventories 
become excessive.
    (c) If BLM determines that geothermal resources (including 
byproducts) were avoidably lost or wasted from the lease, or that 
geothermal resources (including byproducts) were drained from the lease 
for which compensatory royalty is due, the value of those geothermal 
resources shall be determined in accordance with subpart H of 30 CFR 
part 206.
    (d) If a lessee receives insurance or other compensation for 
unavoidably lost geothermal resources (including byproducts), royalties 
at the rates specified in the lease are due on the amount of that 
compensation. This

[[Page 11]]

paragraph shall not apply to compensation through self-insurance.



Sec. 202.352  Minimum royalty.

    In no event shall the lessee's annual royalty payments for any 
producing lease be less than the minimum royalty established by the 
lease.



Sec. 202.353  Measurement standards for reporting and paying royalties.

    (a) For geothermal resources used to generate electricity, the 
quantity on which royalty is due shall be reported on Form MMS-2014 
(Report of Sales and Royalty Remittance) as follows:
    (1) For geothermal resources valued under arm's-length or non-arm's-
length contracts, quantities shall be reported in:
    (i) Kilowatthours to the nearest whole kilowatthour if the contract 
specifies payment in terms of generated electricity,
    (ii) Thousands of pounds to the nearest whole thousand pounds if the 
contract specifies payment in terms of weight, or
    (iii) Millions of Btu's to the nearest whole million Btu if the 
contract specifies payment in terms of heat or thermal energy.
    (2) For geothermal resources valued by the netback procedure 
pursuant to 30 CFR 206.352(c)(1)(ii) or (d)(1)(ii), the quantities shall 
be reported in kilowatthours to the nearest whole kilowatthour.
    (b) For geothermal resources used in direct utilization processes, 
the quantity on which royalty is due shall be reported on Form MMS-2014 
in:
    (1) Millions of Btu's to the nearest whole million Btu if valuation 
is in terms of thermal energy used or displaced,
    (2) Hundreds of gallons to the nearest hundred gallons of geothermal 
fluid produced if valuation is in terms of volume, or
    (3) Other measurement unit approved by MMS for valuation and 
reporting purposes.
    (c) For byproduct minerals, the quantity on which royalty is due 
shall be reported on Form MMS-2014 consistent with MMS-established 
reporting standards.
    (d) For commercially demineralized water, the quantity on which 
royalty is due shall be reported on Form MMS-2014 in hundreds of gallons 
to the nearest hundred gallons.
    (e) Lessees are not required to report the quality of geothermal 
resources, including byproducts, to MMS. The lessee must maintain 
quality measurements for audit and valuation purposes. Quality 
measurements include, but are not limited to, temperatures and chemical 
analyses for fluid geothermal resources and chemical analyses, weight 
percent, or other purity measurements for byproducts.



                    Subpart I--OCS Sulfur--[Reserved]



PART 203--RELIEF OR REDUCTION IN ROYALTY RATES--Table of Contents




                      Subpart A--General Provisions

Sec.
203.1 Authority for information collection.

              Subpart B--OCS Oil, Gas, and Sulfur, General

203.50  Definitions.
203.51  What is MMS's authority to grant royalty relief?
203.52  Net revenue share royalty relief.
203.53  Royalty relief for certain deep-water leases in the Gulf of 
          Mexico.
203.54  [Reserved]
203.55  What information is required for the net revenue share royalty 
          relief and deep-water royalty relief application supplemental 
          reports?
203.56  Recovery of application processing costs.

              Subpart C--Federal and Indian Oil [Reserved]

              Subpart D--Federal and Indian Gas [Reserved]

              Subpart E--Solid Minerals, General [Reserved]

                             Subpart F--Coal

203.250  Advance royalty.
203.251  Reduction in royalty rate or rental.

[[Page 12]]

               Subpart G--Other Solid Minerals [Reserved]

               Subpart H--Geothermal Resources [Reserved]

                    Subpart I--OCS Sulfur [Reserved]

    Authority: 25 U.S.C. 396 et seq.; 25 U.S.C. 396a et seq.; 25 U.S.C. 
2101 et seq.; 30 U.S.C. 181 et seq.; 30 U.S.C. 351 et seq.; 30 U.S.C. 
1001 et seq.; 30 U.S.C. 1701 et seq.; 31 U.S.C. 9701; 43 U.S.C. 1301 et 
seq.; 43 U.S.C. 1331 et seq.; and 43 U.S.C. 1801 et seq.



                      Subpart A--General Provisions

    Source:  61 FR 27274, May 31, 1996, unlesss otherwise noted.



Sec. 203.1  Authority for information collection.

    (a) The Office of Management and Budget (OMB) approved the 
information collection requirements in part 203 under 44 U.S.C. 3501 et 
seq. and assigned OMB control number 1010-0071. The MMS uses the 
information to determine whether granting a royalty relief request will 
result in the production of resources that would not be produced without 
such relief. The application for royalty relief must contain sufficient 
financial, economic, reservoir, geologic and geophysical, production, 
and engineering data and information to determine whether relief should 
be granted in accordance with applicable law. the application also must 
contain sufficient data and information to determine whether the 
requested relief will result in an ultimate increase in resource 
recovery and provide for reasonable returns on project investments. The 
applicant's requirement to respond is related only to the request to 
obtain royalty relief. The applicant has no obligation to make this 
request.
    (b) An agency may not conduct or sponsor, and you are not required 
to respond to, a collection of information unless it displays a 
currently valid OMB control number.
    (c) Send comments regarding the burden of this information 
collection or any other aspect of the collection of information under 
provisions of this part, including suggestions for reducing the burden, 
to the Information Collection Clearance Officer; Minerals Management 
Service, Mail Stop 2300, 381 Elden Street; Herndon, Virginia 20170-4817 
and the Office of Management and Budget; Office of Information and 
Regulatory Affairs, Attn: Desk Officer for the Department of the 
Interior (1010-0071); Washington, DC 20503.
    (d) The MMS will protect information considered confidential or 
proprietary under applicable law and under regulations at 
Sec. 203.53(b)(ii) and part 250 of this chapter.



              Subpart B--OCS Oil, Gas, and Sulfur, General

    Source:  61 FR 27274, May 31, 1996, unless otherwise noted.



Sec. 203.50  Definitions.

    Terms used in this part have the following meaning:
    Field means an area consisting of a single reservoir or multiple 
reservoirs all grouped on, or related to, the same general geological 
structural feature and/or stratigraphic trapping condition. There may be 
two or more reservoirs in a field that are separated vertically by 
intervening impervious strata, or laterally by local geologic barriers, 
or both.
    Pre-enactment deep-water lease (PDWL) means an Outer Continental 
Shelf (OCS) lease issued as a result of a lease sale held before 
November 28, 1995. The lease must be in a water depth of at least 200 
meters and in the Gulf of Mexico west of 87 degrees, 30 minutes West 
longitude.
    Project to significantly expand production (PSEP) means a project 
proposed in an approved Supplemental Development Operations Coordination 
Document (DOCD) that will result in an increase in ultimate recovery of 
resources from the field and that involves a substantial capital 
investment (e.g., the addition of a fixed-leg platform, subsea template 
and manifold, tension-leg platform, multiple well projects). The project 
must be on a PDWL.
    Sunk costs means costs (as specified in Sec. 203.55) of exploration, 
development, and production incurred after the date of first discovery 
on the field and prior to the date of application for royalty relief. 
Sunk costs also include the costs

[[Page 13]]

of the discovery well qualified as producible under 30 CFR 250.11.



Sec. 203.51  What is MMS's authority to grant royalty relief?

    Under the OCS Lands Act, 43 U.S.C. 1337, as amended by the OCS Deep 
Water Royalty Relief Act, Public Law 104-58, MMS may grant three types 
of royalty relief listed in this section.
    (a) Under 43 U.S.C. 1337(a)(3)(A), MMS may reduce, suspend, or 
eliminate the royalty specified for any producing OCS lease to promote 
increased production. If your OCS lease has inadequate revenues to 
sustain production or if you are proposing a project to expand 
production that would be uneconomic without royalty relief, MMS may 
grant royalty relief as specified in these regulations at Sec. 203.52 
(Net Revenue Share Royalty Relief).
    (b) Under 43 U.S.C. 1337(a)(3)(B), MMS may grant royalty reductions 
or suspensions to promote development, increase production, or encourage 
production of marginal resources on producing or non-producing leases in 
the Gulf of Mexico, west of 87 degrees, 30 minutes West longitude. 
Section 203.54 is reserved for the regulations to implement this 
provision.
    (c) Under 43 U.S.C. 1337(a)(3)(C), if your PDWL is on a field that 
did not produce before November 28, 1995, or if you have a PDWL where 
you propose a PSEP, MMS may suspend royalties for volumes of new 
production which would be uneconomic without royalty relief as specified 
in these regulations in Sec. 203.53 (Royalty relief for certain deep-
water leases in the Gulf of Mexico).



Sec. 203.52  Net revenue share royalty relief.

    (a) How do I apply for net revenue share (NRS) royalty relief?
    This section explains how to obtain royalty relief under 43 U.S.C. 
1337(a)(3)(A) if your lease has inadequate revenues to sustain 
production or if you are proposing a project to expand production that 
would be uneconomic without royalty relief. To apply for relief, submit 
a complete application to the appropriate MMS Regional Director in 
accordance with this section and the applicable guidelines in 
Sec. 203.52(b) and Sec. 203.55. An application fee in accordance with 
Sec. 203.56 must accompany the application.
    (b) What do I need to include in my application?
    (1) A complete application for royalty relief must include an 
original and two copies of:
    (i) Administrative Information and Relief Justification, and
    (ii) Net Revenue Share Economic Viability Report.
    (2) If you are proposing a project to expand production that would 
be uneconomic without royalty relief, your application must also include 
two copies (one set of digital information) of:
    (i) Geologic and Geophysical Report;
    (ii) Production Report; and
    (iii) Engineering Report.
    (3) Section 203.55 describes the reports required for the complete 
application. The appropriate regional office will provide specific 
guidance on the format for the required reports.
    (c) What are the NRS royalty relief approval criteria?
    (1) MMS may grant your request for royalty relief only if it 
concludes that royalty relief will increase the ultimate recovery of 
hydrocarbons by extending lease production for at least one year. 
However, if you are proposing a project to expand production, MMS will 
approve your request for royalty relief only if the proposed project 
would be uneconomic without royalty relief.
    (2) If you have a lease with inadequate revenues to sustain 
production, MMS may grant your request for royalty relief only if it 
concludes that:
    (i) Royalties paid to MMS over the most recent 12-month period 
exceed 75 percent of net revenues; and
    (ii) Royalties are projected to take an increasing share of net 
revenues over the next 12 months.
    (d) What royalty relief will MMS grant?
    (1) Except as provided in paragraph (d)(2) of this section, if you 
meet the royalty relief criteria of this section, MMS may offer to 
modify the royalty terms of your lease to a NRS. The percentage of the 
net revenue due to MMS will be established in the MMS NRS guidelines 
available in the appropriate Regional Office.

[[Page 14]]

    (2) If you are proposing a project to expand production but no 
amount of royalty relief would make the project economic, MMS will deny 
the request for royalty relief.



Sec. 203.53  Royalty relief for certain deep-water leases in the Gulf of Mexico.

    (a) Who may apply for deep-water royalty relief?
    This section explains how to obtain royalty relief under 43 U.S.C. 
1337(a)(3)(C). You may apply for royalty relief if you are a lessee of a 
PDWL or a unit that contains one or more PDWL's, subject to the 
limitation in paragraph (b)(3) of this section. You may apply for relief 
if:
    (1) your lease or unit is part of a field from which no royalties 
were due on production, other than test production, prior to November 
28, 1995; or
    (2) you are proposing a PSEP.
    (b) How do I apply for deep-water royalty relief?
    (1) You must submit a complete application to the MMS Regional 
Director of the Gulf of Mexico OCS Region. An application fee in 
accordance with Sec. 203.56 must accompany the application.
    (2) A complete application includes an original and two copies (one 
set of digital information) of:
    (i) Administrative Information and Relief Justification;
    (ii) Deep-Water Royalty Relief Economic Viability Report;
    (iii) Deep-Water Royalty Relief Cost Report;
    (iv) Geologic and Geophysical Report;
    (v) Production Report; and
    (vi) Engineering Report.

Section 203.55 describes what these reports must include. The Gulf of 
Mexico Regional Office will provide specific guidance on the format for 
the required reports.
    (3) For a royalty suspension on production from fields from which no 
royalties were due on production, other than test production, before 
November 28, 1995:
    (i) Except as provided in paragraph (b)(3)(iii) of this section, MMS 
will accept only one joint application for all leases that are part of 
the field on the date of application. The Regional Director maintains a 
list of all leases in each discovered field.
    (ii) If a lessee does not want to share proprietary data with other 
lessees on the field, that lessee may submit separately to MMS the 
proprietary geological or geophysical data that is a necessary part of 
the joint application. The application is not complete until MMS 
receives all the required information for each lease on the field. In 
explaining its assumptions and reasons for its determinations under this 
section, MMS will not disclose proprietary data.
    (iii) MMS will waive the joint application requirement if the 
applicant(s) shows good cause for the waiver. The applicant also must 
demonstrate that it made a good faith effort to obtain the participation 
of all lessees in the field. A lease that is part of the field on the 
date of application but that is not included in the application because 
its lessee(s) fails or refuses to participate is not eligible for the 
royalty relief for the field that is the subject of the application. 
However, that lessee still may apply for other royalty relief under this 
section.
    (iv) With the exceptions listed below, the lessees on a field may 
submit only one complete application for royalty relief during the life 
of the field. However, lessees may submit another application if:
    (A) They are eligible to apply for a redetermination under 
Sec. 203.53(d)(1);
    (B) MMS has withdrawn approval of a previously granted royalty 
suspension under Sec. 203.53(e);
    (C) They apply for royalty relief for a PSEP; or
    (D) They withdraw the application before MMS deems it complete.
    (c) How will MMS evaluate an application?
    (1)(i) MMS will determine within 20 working days if your application 
for royalty relief is complete. If your application is incomplete, MMS 
will provide you with an explanation of what it needs to become 
complete. If you withdraw your application after MMS has deemed it 
complete, you may only reapply under the redetermination provision of 
Sec. 203.53(d).
    (ii) When MMS determines that your application is complete, MMS will

[[Page 15]]

evaluate the application within 180 days. MMS may extend the 180-day 
evaluation period for an additional 30 days, if necessary, to complete 
the evaluation. If you agree, MMS also may extend the 180-day period for 
more than 30 days.
    (iii) If MMS must audit sunk costs to evaluate your application, MMS 
may request that the 180-day evaluation period be tolled from the time 
you receive notice from MMS until you provide the records necessary to 
conduct the audit.
    (iv) If MMS determines during the evaluation period that it cannot 
evaluate your application because:
    (A) vital information is missing;
    (B) the data and information provided in support of the application 
are inconclusive; or
    (C) of any other valid reason;
MMS may request that the 180-day evaluation period be tolled from the 
time you receive notice from MMS until you provide needed data, 
explanations, or revisions.
    (2)(i) If your application is for a suspension of royalties on 
production from a field from which no royalties were due on production, 
other than test production, before November 28, 1995, MMS will determine 
if development of the field is economic without royalty relief. MMS will 
include your sunk costs in making this determination. If MMS determines 
that development of the field would be economic without relief, MMS will 
deny your request for a royalty suspension.
    (ii) For fields that did produce, other than test production, before 
the date of application, MMS will not include your sunk costs when it 
determines if development of the field is economic without royalty 
relief. If MMS determines that development of the field would be 
economic without relief, MMS will deny your request for a royalty 
suspension.
    (iii) If MMS determines for a field subject to either paragraph 
(c)(2) (i) or (ii) of this section that development of the field would 
not be economic without a royalty suspension, and that a royalty 
suspension could make the project economic, MMS will determine the size 
of the royalty suspension volume necessary to make the field 
economically viable. MMS will determine your royalty suspension volume 
subject to the minimum royalty suspension volumes specified in paragraph 
(h)(1)(i) of this section. MMS will not include sunk costs when it makes 
this determination.
    (iv) If no amount of royalty suspension would make the field 
economic, MMS will deny your request for royalty relief.
    (3)(i) If your application for royalty relief is for a PSEP, MMS 
will determine if the proposed project is economic without royalty 
relief. If it is economic, MMS will deny your request for royalty 
relief.
    (ii) If MMS determines that development of the project would not be 
economic without royalty relief, MMS will determine the royalty 
suspension volume necessary to make the project economically viable.
    (iii) If no amount of royalty suspension volume would make the 
project economic, MMS will deny your request for royalty relief.
    (iv) MMS will not include sunk costs in evaluating applications for 
royalty relief for a PSEP.
    (4) If MMS approves your application for royalty relief, you must 
submit a pre-production report 60 days before the planned start of 
production which is subject to the royalty suspension volume, as 
specified at Sec. 203.55.
    (d) When will MMS reconsider its determination?
    (1) You may request a redetermination of either a denial of an 
application or the size of the royalty suspension volume granted in an 
approved application. However, you may request a redetermination only if 
you have not started producing hydrocarbons subject to the royalty 
suspension and one of the following situations occurs:
    (i) You have significant new geologic or geophysical data that did 
not exist at the time of the previous application and that causes you to 
change your estimates of gross resource size, quality, or projected flow 
rates. Examples of new data include results from drilling new wells or 
obtaining new three-dimensional seismic data and information. 
Reinterpretation of existing data is not significant new data. The 
change

[[Page 16]]

in resource information must be sufficient to materially affect the 
results of the previous determination.
    (ii) Prices for oil or gas have decreased at least 25 percent, 
determined as follows:
    (A) Calculate the arithmetic average of daily closing prices for 
light sweet crude oil and for natural gas on the New York Mercantile 
Exchange (NYMEX) for the most recent 12 months.
    (B) Calculate the weighted average prices for oil and gas calculated 
under (d)(1)(ii)(A) of this section using the volumes of oil and gas 
identified in the most likely scenario (required under Sec. 203.55) 
described in your previous complete application for royalty relief.
    (C) Perform the same calculations as required in paragraphs 
(d)(1)(ii) (A) and (B) of this section, but use the arithmetic average 
of daily closing prices for light sweet crude oil and for natural gas on 
the NYMEX for the 12-month period preceding the date of your previous 
complete application.
    (D) If the weighted average price calculated under paragraph 
(d)(1)(ii)(B) of this section is at least 25 percent less than the 
weighted average price calculated under paragraph (d)(1)(ii)(C) of this 
section, then you satisfy the requirements of this paragraph; or
    (iii) Prior to starting construction of your development/production 
system, you have revised your estimated development costs, and they are 
at least 120 percent of the eligible development costs associated with 
the most likely scenario described in your previous complete 
application.
    (2)(i) Your request for a redetermination must include a new 
complete application, as discussed in paragraph (b) of this section and 
Sec. 203.55. MMS will evaluate your application for a redetermination 
under paragraph (c) of this section.
    (ii) MMS will determine within 20 working days if your application 
for a redetermination is complete. If your application is incomplete, 
MMS will provide you with an explanation of what it needs to become 
complete. If MMS later determines that your application does not meet 
any of the criteria under (d)(1) (i), (ii), or (iii) of this section, it 
will consider your application incomplete.
    (iii) When MMS determines that your application is complete, MMS 
will evaluate the application within 120 days. MMS may extend the 120-
day evaluation period for an additional 30 days if necessary to complete 
the evaluation. If you agree, MMS also may extend the 120-day period for 
more than 30 days.
    (iv) If MMS must audit sunk costs to evaluate your application, MMS 
may request that the 120-day evaluation period be tolled from the time 
you receive notice from MMS until you provide the records necessary to 
conduct the audit.
    (v) If MMS determines during the evaluation period that it cannot 
evaluate your application because:
    (A) Vital information is missing;
    (B) The data and information provided in support of the application 
are inconclusive; or
    (C) Of any other valid reason;
MMS may request that the 120-day evaluation period be tolled from the 
time you receive notice from MMS until you provide the needed data, 
explanations, or revisions.
    (e) When may MMS withdraw approval of an application for royalty 
relief?
    MMS will withdraw approval of your application for royalty relief 
if:
    (1) You change the type of development system proposed in your 
approved application (e.g., change from stand-alone to tieback or vice 
versa);
    (2) You fail to start construction of the approved development/
production system within two years of the date MMS approved your 
application--notwithstanding any suspension granted under Sec. 250.10 of 
this chapter; or
    (3)(i) The actual development costs reported in your pre-production 
report (paragraph (c)(4) of this section) are less than 80 percent of 
the development costs from the date of application to the date of the 
pre-production report associated with the most likely scenario described 
in your approved application. In this case, you may retain 50 percent of 
the amount of the royalty suspension volume that MMS previously granted.
    (ii) If MMS granted you a royalty suspension volume after you 
requested

[[Page 17]]

a redetermination under paragraph (d)(1)(iii) of this section, MMS may 
withdraw approval of your application for a royalty suspension if your 
actual development costs in your pre-production report (paragraph (c)(4) 
of this section) are less than 90 percent of the eligible development 
costs from the date of application to the date of the pre-production 
report associated with the most likely scenario described in your 
approved application.
    (iii) If MMS discovers that the actual development costs are less 
than the amounts specified in paragraphs (e)(3) (i) or (ii) of this 
section, MMS will withdraw retroactively its approval of the royalty 
suspension volume. You will owe royalties and interest on all production 
that was subject to the previously granted royalty suspension.
    (4) If MMS determines that you provided false historical or 
intentionally inaccurate information that was material to MMS in 
granting royalty relief under this section, MMS will rescind its 
approval as of the date of the approval. You must pay royalties and late 
payment interest determined under 30 U.S.C. 1721 and Sec. 218.54 of this 
chapter on all volumes for which you used the royalty suspension. You 
also may be subject to penalties under other provisions of law.
    (5) If MMS withdraws its approval of a royalty suspension for any of 
the reasons in paragraphs (e) (1), (2) or (3) of this section, you may 
apply again for relief under paragraph (b) of this section and 
Sec. 203.55.
    (f) What happens if MMS fails to accept or reject my application in 
a timely manner?
    (1) For applications for fields from which no royalties were due on 
production, other than test production, prior to November 28, 1995, if 
MMS does not make its determinations on your application within the time 
period specified in paragraph (c)(1) or (d)(1) of this section, 
including any applicable extension, you will receive the minimum royalty 
suspension volumes specified in paragraph (h)(1)(i) of this section.
    (2) For PSEP applications, if MMS does not make its determinations 
on your application within the time period specified in paragraph (c)(1) 
or (d)(2) of this section, including any applicable extension, you will 
receive a royalty suspension for the first year of the project's 
production.
    (g) How do I appeal an MMS decision under Sec. 203.53?
    (1) MMS' decision whether to grant deep-water royalty relief and its 
decision on the size of the royalty suspension volume are final agency 
actions. You have no right to further administrative review, including 
Secretarial review, of these decisions. The MMS's decisions are 
judicially reviewable under section 10(a) of the Administrative 
Procedure Act (5 U.S.C. 702) only if you file an action within 30 days 
of the date you receive MMS's decision. MMS's will send its decision to 
you by certified mail, return receipt requested.
    (2)(i) Except as provided in paragraph (g)(2)(ii) of this section, 
MMS decisions on designating a lease as part of a field are final agency 
actions.
    (ii) If MMS designates your lease as part of a field, within 15 days 
of such designation you may file a written request with the Director for 
reconsideration accompanied by a statement of reasons. The Director will 
respond in writing either affirming or reversing the decision. The 
Director's decision is the final decision of the Department.
    (h) How does a royalty suspension volume apply to your production?
    This paragraph explains how the royalty suspension volumes in 
section 302 of the OCS Deep Water Royalty Relief Act, apply to 
production from PDWL's. For purposes of this paragraph, any volumes of 
production that are not royalty bearing under the lease or the 
regulations in this chapter do not count against royalty suspension 
volumes. Also, for purposes of this paragraph, production includes 
volumes allocated to a lease under an approved unit agreement. The 
following provisions apply only to those leases for which the lessee(s) 
applies for and receives a royalty suspension volume under this section.
    (1) For fields from which no royalties were due on production, other 
than test production, prior to November 28, 1995:
    (i) The water depth of a lease is based on the water depth 
delineations in the

[[Page 18]]

``Royalty Suspension Areas Map'' in effect at the time of your 
application. If the application for the field includes leases in 
different water depth categories, the minimum royalty volume associated 
with the deepest lease applies. The minimum royalty suspension volumes 
are: (A) 17.5 million barrels of oil equivalent (MMBOE) in 200 to 400 
meters of water; (B) 52.5 MMBOE in 400 to 800 meters of water; and (C) 
87.5 MMBOE in more than 800 meters of water.
    (ii) If your PDWL is the only lease on the field, you do not owe 
royalty on the production from your lease up to the royalty suspension 
volume MMS granted.
    (iii) If a field consists of more than one PDWL, payment of 
royalties on the PDWLs' production is suspended until their cumulative 
production equals the royalty suspension volume MMS granted. The royalty 
suspension volume for each lease equals each lease's actual production 
(or production allocated under an approved unit agreement) until 
cumulative production equals the field's royalty suspension volume.
    (iv) If a PDWL or an eligible lease, as defined in Sec. 260.102 of 
this chapter, is added to a field for which MMS has granted a royalty 
suspension volume under this section, the field's royalty suspension 
volume will not change. The additional lease may receive a royalty 
suspension volume only to the extent of its production from the field 
before the cumulative production from the field equals the royalty 
suspension volume MMS approved. However, before your PDWL may 
participate in the royalty suspension volume already granted to the 
field, you must apply for royalty relief using an abbreviated form 
available at the Gulf of Mexico OCS Regional Office.
    (v) If your PDWL is part of a field that already has a royalty 
suspension volume for eligible leases under Sec. 260.110 of this 
chapter, and you apply and qualify for royalty relief under this 
section, all the leases in the field share a single royalty suspension 
volume that is the greater of the volume established for the eligible 
leases under Sec. 260.110 of this chapter or the volume MMS determines 
under this section.
    (2) For a PSEP:
    (i) If your PDWL is the only lease included in the project, you do 
not owe royalty on the incremental production from the project up to the 
royalty suspension volume MMS granted.
    (ii) If the project includes more than one lease, the royalty 
suspension volume for each lease equals each lease's actual incremental 
production from the project (or production allocated under an approved 
unit agreement) until cumulative incremental production for all leases 
in the project equals the project's royalty suspension volume.
    (3) Your lease may receive more than one royalty suspension volume. 
You may apply for royalty relief under this section for each field that 
includes your lease, and each field would receive a separate royalty 
suspension volume if it meets the evaluation criteria of paragraph 
203.53(c). You may also apply for relief for a PSEP, even if MMS has 
already granted a royalty suspension volume to the field that 
encompasses that project.
    (4) You may receive a royalty suspension volume only if your entire 
lease is west of 87 degrees, 30 minutes West longitude. A field that 
lies on both sides of this meridian will receive a royalty suspension 
volume only for those leases lying entirely west of the meridian.
    (5) You must measure natural gas production subject to the royalty 
suspension volume as follows: 5.62 thousand cubic feet of natural gas 
equals one barrel of oil equivalent, as measured at 15.025 psi, 60 
degrees Fahrenheit, and fully saturated.
    (6)(i) If in the previous calendar year the arithmetic average of 
the daily closing prices on the NYMEX for light sweet crude oil exceeds 
$28.00 per barrel, as adjusted in paragraph (h)(8) of this section, the 
royalty relief authorized in this section is suspended and any 
production of oil is subject to royalties at the lease stipulated 
royalty rate. However, this production counts as part of the established 
royalty suspension volume. By January 31 of the current calendar year, 
you must pay the royalty due plus interest, in accordance with 30 U.S.C 
1721 and Sec. 218.54 of this chapter, on any volume of oil

[[Page 19]]

from the previous year for which you did not pay royalty.
    (ii) If the arithmetic average of the daily closing prices on the 
NYMEX for light sweet crude oil from the previous calendar year exceeds 
$28.00 per barrel, as adjusted in paragraph (h)(8) of this section, you 
must pay royalties on all your oil production in the current year. If 
the arithmetic average of the daily closing prices on the NYMEX for 
light sweet crude oil for the current calendar year is $28.00 per barrel 
or less, as adjusted in paragraph (h)(8) of this section, you are 
entitled to a refund or credit, with interest, of royalties paid that 
year on any royalty suspension volume for oil production. You must 
follow MMS regulations at part 230 of this chapter for receiving refunds 
or credits.
    (7)(i) If in the previous calendar year the arithmetic average of 
the daily closing prices on the NYMEX for natural gas exceeds $3.50 per 
million British thermal units, as adjusted in paragraph (h)(8) of this 
section, the royalty relief authorized in this section is suspended and 
any production of natural gas is subject to royalties at the lease 
stipulated royalty rate. However, this production counts as part of the 
established royalty suspension volume. By January 31 of the current 
calendar year, you must pay the royalty due plus interest, in accordance 
with 30 U.S.C 1721 and Sec. 218.54 of this chapter, on any volume of 
natural gas from the previous year for which you did not pay royalty.
    (ii) If the arithmetic average of the daily closing prices on the 
NYMEX for natural gas for the previous calendar year exceeds $3.50 per 
million British thermal units, as adjusted in paragraph (h)(8) of this 
section, you must pay royalties on all your natural gas production in 
the current year. If the arithmetic average of the daily closing prices 
on the NYMEX for natural gas for the current calendar year is $3.50 per 
million British thermal units or less, as adjusted in paragraph (h)(8) 
of this section, you are entitled to a refund or credit, with interest, 
of royalties paid that year on any royalty suspension volume for natural 
gas production. You must follow MMS regulations at part 230 of this 
chapter for receiving refunds or credits.
    (8) Change the prices referred to in paragraphs (h)(6) and (7) of 
this section during each calendar year after 1994 by the percentage, if 
any, by which the implicit price deflator for the gross domestic product 
changed during the preceding calendar year.
    (9) A royalty suspension volume will continue until the end of the 
month in which the cumulative production from the field or PSEP reaches 
the established royalty suspension volume.



Sec. 203.54  [Reserved]



Sec. 203.55  What information is required for the net revenue share royalty relief and deep-water royalty relief application supplemental reports?

    (a) You must submit the applicable supplemental reports listed 
below.
    (1) Administrative information and relief justification. All royalty 
relief applications must contain this report, which must include:
    (i) Field name;
    (ii) Serial number of leases in the field, names of the lease the 
titleholders of record, the lease operators, and the identification of 
whether any lease is part of a unit;
    (iii) The API number and location of each well that has been drilled 
on the field/lease or project;
    (iv) Location of any new wells proposed under the terms of the 
application;
    (v) Description of field/lease history;
    (vi) Statement that the reserves would not be produced without 
relief;
    (vii) Full information as to whether royalties or payment out of 
production will be paid to anyone other than the United States, the 
amount to be paid, and the amount of reduction in such payment if relief 
is granted;
    (viii) Amount of relief needed to make the lease (NRS royalty 
relief), field (deep-water royalty relief), or project economic;
    (ix) Confirmation that MMS approved a DOCD or supplemental DOCD (NRS 
expansion of production and deep-water royalty relief application only); 
and
    (x) A narrative description of the development activities associated 
with the proposed capital investments and an explanation of proposed 
timing of

[[Page 20]]

the activities and the effect on production (NRS expansion of production 
and deep-water royalty relief application only).
    (2) Net revenue share economic viability report. NRS royalty relief 
applications must contain this report. This report must present cash 
flow data, including 36 months of historical data and 12 months of 
projected data, for the following items:
    (i) Lease production subject to royalty;
    (ii) Total revenues;
    (iii) Royalty payments out of production;
    (iv) Operating costs;
    (v) Transportation and processing costs;
    (vi) Capital expenditures (if applicable); and
    (vii) Well drilling costs (if applicable).
    (3) Deep-water royalty relief economic viability report. This report 
should demonstrate that the project appears economic without royalties 
and sunk costs using the model provided by MMS. A company may provide 
supplemental information, including its own model and model results. 
This report must include all of the items listed below.
    (i) Economic assumptions provided by MMS:
    (A) Starting oil and gas prices;
    (B) Real price growth;
    (C) Real cost growth or decline rate, if any;
    (D) Base year;
    (E) Range of discount rates; and
    (F) Tax rate (for use in determining after-tax sunk costs).
    (ii) Projected cash flow analysis (from application date using 
annual totals and constant dollar values). All costs, gross production, 
and scheduling must be consistent with the data in the reserve, 
engineering, production, and cost reports, and the three scenarios 
(conservative, most likely, optimistic; provided in the various reports 
must be consistent with each other and the proposed development system. 
The analysis must show:
    (A) Oil/gas production;
    (B) Total revenues;
    (C) Capital expenditures;
    (D) Operating costs;
    (E) Transportation costs; and
    (F) Before tax net cash flow.
    (iii) Discounted values.
    (A) Discount rate used (selected from within range provided in MMS 
guidelines).
    (B) Before tax net present value without royalties, overrides, sunk 
costs, and ineligible costs.
    (4) Deep-water royalty relief cost report. Deep-water royalty relief 
applications must contain this report. Report all actual and projected 
costs listed in this paragraph in the format detailed in the guidelines.
    (i) Sunk costs. This includes all eligible costs, in current dollars 
and for which documentation is provided, actually incurred subsequent to 
and including the first discovery well on the field. Sunk costs count on 
an after-tax, expensed basis, using nominal (current dollar) amounts.
    (ii) Delineation and development costs, based on actual costs or 
current authorization for expenditures. These costs include:
    (A) Platform well drilling costs and average depth;
    (B) Platform well completion costs;
    (C) Subsea well drilling costs and average depth;
    (D) Subsea well completion costs;
    (E) Production system (platform) costs; and
    (F) Flowline fabrication and installation costs.
    (iii) Production costs, based on historical costs, engineering 
estimates, or analogous projects. These costs include:
    (A) Operating costs;
    (B) Equipment costs; and
    (C) Existing royalty overrides (MMS will not use the royalty 
overrides in its evaluation).
    (iv) Transportation costs, based on historical costs, engineering 
estimates, or analogous projects. These costs include:
    (A) Oil and/or gas tariffs from pipeline or tankerage;
    (B) Trunkline/tieback line costs; and
    (C) Gas plant processing costs for NGL's.
    (v) Ineligible costs. These costs include:
    (A) Acquisition costs;
    (B) Application fees;

[[Page 21]]

    (C) Prospective exploration well costs;
    (D) Costs associated with obligations existing prior to the 
application; and
    (E) Other ineligible costs listed in Sec. 203.55(b).
    (vi) Uncertainty. You must provide a cost scenario consistent with 
each one of the three field development and production profiles 
(conservative, most likely, optimistic). Express costs in constant real 
dollar terms for the base year. You may also express the uncertainty of 
each cost scenario as a minimum and maximum percentage of the base 
value.
    (vii) Scheduling. Provide costs on an annual basis (in real dollars) 
for each of the categories in paragraphs (a)(4)(i) through (a)(4)(vi) of 
this section.
    (viii) Abandonment. Provide the costs to plug and abandon wells and 
to remove production systems for which costs have not been incurred at 
the time of application.
    (ix) Pre-production report. You must file a pre-production report 60 
days before the start of the production subject to an approved royalty 
suspension. For each of the cost categories in the deep-water royalty 
relief cost report, you must include actual costs up to the date when 
the pre-production report is submitted. Retain supporting records for 
these costs and make them available to MMS upon request.
    (5) Geologic and geophysical report. Deep-water royalty relief and 
NRS production expansion proposal applications must contain this report. 
This report must include all of the items listed below.
    (i) Seismic data:
    (A) Non-interpreted 2D/3D survey lines (8mm tape) (SEGY format or 
IES format);
    (B) Interpreted 2D/3D seismic survey lines identifying all known and 
prospective pay horizons, wells, and fault cuts;
    (C) Digital velocity surveys in format of LTL 10/1/90;
    (D) Plat map of ``shot points;'' and
    (E) ``Time slices'' of potential horizons.
    (ii) Well data.
    (A) Hard copies of all well logs.
    (1) One-inch electric log must show:
    (i) pay zones and pay counts; and
    (ii) lithologic and paleo correlation markers at least every 500 ft.
    (2) One-inch type log must show missing sections from other logs 
where faulting occurs.
    (3) Five-inch electric log must show:
    (i) pay zones and pay counts; and
    (ii) labeled points used in establishing Ro and Rt.
    (4) Five-inch porosity logs must show:
    (i) pay zones and pay counts; and
    (ii) labeled points used in establishing reservoir porosity or 
labeled points showing values used in calculating reservoir porosity 
such as bulky density or transit time.
    (B) Digital copies of all well logs spudded before December 1, 1995.
    (C) Core data, if available.
    (D) Well correlation sections.
    (E) Pressure data.
    (F) Production test results.
    (G) PVT analysis, if available.
    (iii) Map interpretations. For each reservoir included in the 
application, you must submit:
    (A) Structure maps and top and base of sand maps showing well and 
seismic shot point locations;
    (B) Isopach maps for net sand, net oil, net gas, all with well 
locations;
    (C) Maps indicating well surface and bottom hole locations, location 
of development facilities, and shot points; and
    (D) Identification of reservoirs not contemplated for development.
    (iv) Reservoir data. For each reservoir included in the application, 
you must identify and submit:
    (A) Oil and/or gas reserve/resource distribution;
    (B) Probability of reservoir occurrence with hydrocarbons;
    (C) Probability the hydrocarbon in the reservoir is oil, and the 
probability it is gas;
    (D) Distributions for the parameters used to estimate the resources, 
i.e. acre, net thickness, recovery, porosity, salt water saturation, 
formation volume factor;
    (E) Aggregated BOE reserve/resource for the field;
    (F) Gas/oil ratio distribution for each reservoir;
    (G) Yield distribution for each gas reservoir;

[[Page 22]]

    (H) Description of anticipated crude quality (e.g., gravity); and
    (I) Points on the aggregated reserve/resource distribution used for 
the determination of the three (conservative, most likely, optimistic) 
production profiles specified in the production report.
    (6) Production report. Deep-water royalty relief and NRS production 
expansion proposal applications must contain this report, which must 
include all of the items listed below.
    (i) Production profile. Submit actual and projected (BOE) production 
by year for each of the following products: oil, condensate, gas, and 
associated gas.
    (ii) Uncertainty (deep-water royalty relief only). Submit three 
production profiles as described in paragraph (a)(6)(i) of this section. 
Each one must be consistent with a specific point on the aggregated 
reserve/resource distribution and must represent a conservative, most 
likely, and an optimistic case.
    (iii) Production drive mechanisms for each reservoir.
    (iv) Quality adjustments to prices for gravity, sulfur, etc.
    (7) Engineering report. Deep-water royalty relief and NRS production 
expansion proposal applications must contain this report. However, NRS 
expanded production applications should submit this information only as 
it relates to the planned development. This report must include all of 
the items listed below.
    (i) Development concept:
    (A) Tension leg platform, fixed, floater type, subsea tieback, etc.; 
and
    (B) Construction schedule.
    (ii) Planned wells:
    (A) Number of wells planned;
    (B) Type of well (platform, subsea, vertical, deviated, horizontal);
    (C) Well depth;
    (D) Drilling schedule;
    (E) Completion description (single, dual, horizontal, etc.); and
    (F) Completion schedule.
    (iii) Production system equipment:
    (A) Production capacity for oil and gas and a description of its 
limiting component(s);
    (B) Unusual problems (low gravity, high sulfur content, etc.);
    (C) Subsea structures;
    (D) Flowlines; and
    (E) Production system installation schedule.
    (iv) Multi-phase development plans;
    (A) Conceptual basis for developing in phases and goals/milestones 
required for commencing subsequent phases; and
    (B) Justification for the exclusion of reservoirs not contemplated 
for development.
    (v) Uncertainty. Submit schedules for development consistent with 
each of the three field production profiles (conservative, most likely, 
optimistic) provided in the production report.
    (b) Ineligible costs. MMS will not include certain costs in making 
its royalty relief determinations. These include, but are not limited 
to:
    (1) Costs incurred before first discovery on the field;
    (2) Cash bonuses;
    (3) Royalty relief application fees;
    (4) Lease rentals, royalties, and net profit share and net revenue 
share payments;
    (5) Legal expenses;
    (6) Damages and losses;
    (7) Taxes;
    (8) Interest or finance charges;
    (9) Fines or penalties;
    (10) Designated well costs, including prospective exploration and 
delineation costs; and
    (11) Costs associated with prior existing obligations (e.g., royalty 
overrides or other forms of payment for acquiring a financial position 
in a lease, expenditures for plugging wells and removal and abandonment 
of facilities existing on the date of the application).
    (c) The applicant or the applicant's authorized representative must 
certify that all information submitted in an application or a pre-
production report is accurate and complete. The application or pre-
production report must be accompanied by a report prepared by an 
independent certified public accountant (CPA) expressing an unqualified 
opinion on the accuracy of the actual historical financial information 
presented in the application or pre-production report and that the 
presentation of data and information conforms to the MMS guidelines. The 
applicant will make the independent CPA available to the MMS to respond 
to

[[Page 23]]

questions which may arise regarding the evaluation of the historical 
information. This requirement does not limit the MMS's ability to 
conduct further review of the applicant's records to support the 
historical financial information included in the application.



Sec. 203.56  Recovery of application processing costs.

    When you submit an application for royalty relief, you must include 
a payment to reimburse MMS for the costs it incurs in processing your 
application. The MMS will establish in a Notice to Lessees a schedule 
that will specify the fees that must be paid for each of the different 
types of royalty relief applications. Regional Directors will 
periodically update the fee schedule to reflect changes in MMS costs as 
well as to provide other information necessary for the administration of 
our royalty relief program.



              Subpart C--Federal and Indian Oil [Reserved]



              Subpart D--Federal and Indian Gas [Reserved]



              Subpart E--Solid Minerals, General [Reserved]



                             Subpart F--Coal



Sec. 203.250  Advance royalty.

    Provisions for the payment of advance royalty in lieu of continued 
operation are contained at 43 CFR 3483.4.

[54 FR 1522, Jan. 13, 1989]



Sec. 203.251  Reduction in royalty rate or rental.

    An application for reduction in coal royalty rate or rental shall be 
filed and processed in accordance with 43 CFR group 3400.

[54 FR 1522, Jan. 13, 1989]



               Subpart G--Other Solid Minerals [Reserved]



               Subpart H--Geothermal Resources [Reserved]



                    Subpart I--OCS Sulfur [Reserved]



PART 206--PRODUCT VALUATION--Table of Contents




                      Subpart A--General Provisions

Sec.
206.10  Information collection.

                          Subpart B--Indian Oil

206.50  Purpose and scope.
206.51  Definitions.
206.52  Valuation standards.
206.53  Point of royalty settlement.
206.54  Transportation allowances--general.
206.55  Determination of transportation allowances.

                         Subpart C--Federal Oil

206.100  Purpose and scope.
206.101  Definitions.
206.102  Valuation standards.
206.103  Point of royalty settlement.
206.104  Transportation allowances--general.
206.105  Determination of transportation allowances.
206.106  Operating allowances.

                         Subpart D--Federal Gas

206.150  Purpose and scope.
206.151  Definitions.
206.152  Valuation standards--unprocessed gas.
206.153  Valuation standards--processed gas.
206.154  Determination of quantities and qualities for computing 
          royalties.
206.155  Accounting for comparison.
206.156  Transportation allowances--general.
206.157  Determination of transportation allowances.
206.158  Processing allowances--general.
206.159  Determination of processing allowances.
206.106  Operating allowances.

                          Subpart E--Indian Gas

206.170  Purpose and scope.
206.171  Definitions.
206.172  Valuation standards--unprocessed gas.
206.173  Valuation standards--processed gas.
206.174  Determination of quantities and qualities for computing 
          royalties.
206.175  Accounting for comparison.
206.176  Transportation allowances--general.

[[Page 24]]

206.177  Determination of transportation allowances.
206.178  Processing allowances--general.
206.179  Determination of processing allowances.

                         Subpart F--Federal Coal

206.250  Purpose and scope.
206.251  Definitions.
206.252  Information to collection.
206.253  Coal subject to royalties--general provisions.
206.254  Quality and quantity measurement standards for reporting and 
          paying royalties.
206.255  Point of royalty determination.
206.256  Valuation standards for cents-per-ton leases.
206.257  Valuation standards for ad valorem leases.
206.258  Washing allowances--general.
206.259  Determination of washing allowances.
206.260  Allocation of washed coal.
206.261  Transportation allowances--general.
206.262  Determination of transportation allowances.
206.263  Contract submission.
206.264  In-situ and surface gasification and liquefaction operations.
206.265  Value enhancement of marketable coal.

                     Subpart G--Other Solid Minerals

206.301  Value basis for royalty computation.

                     Subpart H--Geothermal Resources

206.350  Purpose and scope.
206.351  Definitions.
206.352  Valuation standards for electrical generation.
206.353  Determination of transmission deductions.
206.354  Determination of generating deductions.
206.355  Valuation standards for direct utilization.
206.356  Valuation standards for byproducts.
206.357  Byproduct transportation allowances--general.
206.358  Determination of byproduct transportation allowances.

                    Subpart I--OCS Sulfur [Reserved]

                         Subpart J--Indian Coal

206.450  Purpose and scope.
206.451  Definitions.
206.452  Coal subject to royalties--general provisions.
206.453  Quality and quantity measurement standards for reporting and 
          paying royalties.
206.454  Point of royalty determination.
206.455  Valuation standards for cents-per-ton leases.
206.456  Valuation standards for ad valorem leases.
206.457  Washing allowances--general.
206.458  Determination of washing allowances.
206.459  Allocation of washed coal.
206.460  Transportation allowances--general.
206.461  Determination of transportation allowances.
206.462  Contract submission.
206.463  In-situ and surface gasification and liquefaction operations.
206.464  Value enhancement of marketable coal.

    Authority: 5 U.S.C. 301 et seq.; 25 U.S.C. 396 et seq., 396a et 
seq., 2101 et seq.; 30 U.S.C. 181 et seq., 351 et seq., 1001 et seq., 
1701 et seq.; 31 U.S.C. 9701.; 43 U.S.C. 1301 et seq., 1331 et seq., and 
1801 et seq.



                      Subpart A--General Provisions



Sec. 206.10  Information collection.

    The information collection requirements contained in this part have 
been approved by the Office of Management and Budget (OMB) under 44 
U.S.C. 3501 et seq. The forms, filing date, and approved OMB clearance 
numbers are identified in 30 CFR 210.10.

[57 FR 41863, Sept. 14, 1992]



                          Subpart B--Indian Oil

    Source:  61 FR 5455, Feb. 12, 1996, unless otherwise noted.



Sec. 206.50  Purpose and scope.

    (a) This subpart is applicable to all oil production from Indian 
(Tribal and allotted) oil and gas leases (except leases on the Osage 
Indian Reservation, Osage County, Oklahoma). The purpose of this subpart 
is to establish the value of production, for royalty purposes, 
consistent with the mineral leasing laws, other applicable laws, and 
lease terms.
    (b) If the specific provisions of any Federal statute, treaty, 
settlement agreement between the Indian lessor and a lessee resulting 
from administrative or judicial litigation, or oil and gas lease subject 
to the requirements of this subpart are inconsistent with any regulation 
in this subpart, then the statute, treaty, lease provision or

[[Page 25]]

settlement agreement shall govern to the extent of that inconsistency.
    (c) All royalty payments made to MMS or Indian Tribes are subject to 
audit and adjustment.
    (d) The regulations in this subpart are intended to ensure that the 
trust responsibilities of the United States with respect to the 
administration of Indian oil and gas leases are discharged in accordance 
with the requirements of the governing mineral leasing laws, treaties, 
and lease terms.



Sec. 206.51  Definitions.

    For the purposes of this subpart:
    Allowance means an approved or an MMS-initially accepted deduction 
in determining value for royalty purposes. Transportation allowance 
means an allowance for the reasonable, actual costs incurred by the 
lessee for moving oil to a point of sale or point of delivery off the 
lease, unit area, or communitized area, excluding gathering, or an 
approved or MMS-initially accepted deduction for costs of such 
transportation, determined by this subpart.
    Area means a geographic region at least as large as the defined 
limits of an oil and/or gas field in which oil and/or gas lease products 
have similar quality, economic, and legal characteristics.
    Arm's-length contract means a contract or agreement that has been 
arrived at in the market place between independent, nonaffiliated 
persons with opposing economic interests regarding that contract. For 
purposes of this subpart, two persons are affiliated if one person 
controls, is controlled by, or is under common control with another 
person. For purposes of this subpart, based on the instruments of 
ownership of the voting securities of an entity, or based on other forms 
of ownership: ownership in excess of 50 percent constitutes control; 
ownership of 10 through 50 percent creates a presumption of control; and 
ownership of less than 10 percent creates a presumption of noncontrol 
which MMS may rebut if it demonstrates actual or legal control, 
including the existence of interlocking directorates. Notwithstanding 
any other provisions of this subpart, contracts between relatives, 
either by blood or by marriage, are not arm's-length contracts. MMS may 
require the lessee to certify ownership control. To be considered arm's-
length for any production month, a contract must meet the requirements 
of this definition for that production month, as well as when the 
contract was executed.
    Audit means a review, conducted in accordance with generally 
accepted accounting and auditing standards, of royalty payment 
compliance activities of lessees or other interest holders who pay 
royalties, rents, or bonuses on Indian leases.
    BIA means the Bureau of Indian Affairs of the Department of the 
Interior.
    BLM means the Bureau of Land Management of the Department of the 
Interior.
    Condensate means liquid hydrocarbons (normally exceeding 40 degrees 
of API gravity) recovered at the surface without resorting to 
processing. Condensate is the mixture of liquid hydrocarbons that 
results from condensation of petroleum hydrocarbons existing initially 
in a gaseous phase in an underground reservoir.
    Contract means any oral or written agreement, including amendments 
or revisions thereto, between two or more persons and enforceable by law 
that with due consideration creates an obligation.
    Field means a geographic region situated over one or more subsurface 
oil and gas reservoirs encompassing at least the outermost boundaries of 
all oil and gas accumulations known to be within those reservoirs 
vertically projected to the land surface. Onshore fields are usually 
given names and their official boundaries are often designated by oil 
and gas regulatory agencies in the respective States in which the fields 
are located.
    Gathering means the movement of lease production to a central 
accumulation or treatment point on the lease, unit, or communitized 
area, or to a central accumulation or treatment point off the lease, 
unit, or communitized area as approved by BLM operations personnel for 
onshore leases.
    Gross proceeds (for royalty payment purposes) means the total monies 
and other consideration accruing to an oil

[[Page 26]]

and gas lessee for the disposition of the oil produced. Gross proceeds 
includes, but is not limited to, payments to the lessee for certain 
services such as dehydration, measurement, and/or gathering to the 
extent that the lessee is obligated to perform them at no cost to the 
Indian lessor. Gross proceeds, as applied to oil, also includes, but is 
not limited to, reimbursements for harboring or terminating fees. Tax 
reimbursements are part of the gross proceeds accruing to a lessee even 
though the Indian royalty interest may be exempt from taxation. Monies 
and other consideration, including the forms of consideration identified 
in this paragraph, to which a lessee is contractually or legally 
entitled but which it does not seek to collect through reasonable 
efforts are also part of gross proceeds.
    Indian allottee means any Indian for whom land or an interest in 
land is held in trust by the United States or who holds title subject to 
Federal restriction against alienation.
    Indian Tribe means any Indian Tribe, band, nation, pueblo, 
community, rancheria, colony, or other group of Indians for which any 
land or interest in land is held in trust by the United States or which 
is subject to Federal restriction against alienation.
    Lease means any contract, profit-share arrangement, joint venture, 
or other agreement issued or approved by the United States under a 
mineral leasing law that authorizes exploration for, development or 
extraction of, or removal of lease products--or the land area covered by 
that authorization, whichever is required by the context.
    Lease products means any leased minerals attributable to, 
originating from, or allocated to Indian leases.
    Lessee means any person to whom an Indian Tribe, or an Indian 
allottee issues a lease, and any person who has been assigned an 
obligation to make royalty or other payments required by the lease. This 
includes any person who has an interest in a lease as well as an 
operator or payor who has no interest in the lease but who has assumed 
the royalty payment responsibility.
    Like-quality lease products means lease products which have similar 
chemical, physical, and legal characteristics.
    Load oil means any oil which has been used with respect to the 
operation of oil or gas wells for wellbore stimulation, workover, 
chemical treatment, or production purposes. It does not include oil used 
at the surface to place lease production in marketable condition.
    Marketable condition means lease products which are sufficiently 
free from impurities and otherwise in a condition that they will be 
accepted by a purchaser under a sales contract typical for the field or 
area.
    Marketing affiliate means an affiliate of the lessee whose function 
is to acquire only the lessee's production and to market that 
production.
    Minimum royalty means that minimum amount of annual royalty that the 
lessee must pay as specified in the lease or in applicable leasing 
regulations.
    MMS means the Minerals Management Service of the Department of the 
Interior.
    Net-back method (or workback method) means a method for calculating 
market value of oil at the lease. Under this method, costs of 
transportation, processing, or manufacturing are deducted from the 
proceeds received for the oil and any extracted, processed, or 
manufactured products, or from the value of the oil or any extracted, 
processed, or manufactured products at the first point at which 
reasonable values for any such products may be determined by a sale 
under an arm's-length contract or comparison to other sales of such 
products, to ascertain value at the lease.
    Net profit share (for applicable Indian lessees) means the specified 
share of the net profit from production of oil and gas as provided in 
the agreement.
    Oil means a mixture of hydrocarbons that existed in the liquid phase 
in natural underground reservoirs and remains liquid at atmospheric 
pressure after passing through surface separating facilities and is 
marketed or used as such. Condensate recovered in lease separators or 
field facilities is considered to be oil. For purposes of royalty 
valuation, the term tar sands is defined separately from oil.
    Oil shale means a kerogen-bearing rock (i.e., fossilized, insoluble, 
organic

[[Page 27]]

material). Separation of kerogen from oil shale may take place in situ 
or in surface retorts by various processes. The kerogen, upon 
distillation, will yield liquid and gaseous hydrocarbons.
    Person means any individual, firm, corporation, association, 
partnership, consortium, or joint venture (when established as a 
separate entity).
    Posted price means the price specified in publicly available posted 
price bulletins, onshore terminal postings, or other price notices net 
of all adjustments for quality (e.g., API gravity, sulfur content, etc.) 
and location for oil in marketable condition.
    Processing  means any process designed to remove elements or 
compounds (hydrocarbon and nonhydrocarbon) from gas, including 
absorption, adsorption, or refrigeration. Field processes which normally 
take place on or near the lease, such as natural pressure reduction, 
mechanical separation, heating, cooling, dehydration, and compression 
are not considered processing. The changing of pressures and/or 
temperatures in a reservoir is not considered processing.
    Selling arrangement  means the individual contractual arrangements 
under which sales or dispositions of oil are made. Selling arrangements 
are described by illustration in MMS Royalty Management Program Oil and 
Gas Payor Handbook.
    Spot sales agreement  means a contract wherein a seller agrees to 
sell to a buyer a specified amount of oil at a specified price over a 
fixed period, usually of short duration, which does not normally require 
a cancellation notice to terminate, and which does not contain an 
obligation, nor imply an intent, to continue in subsequent periods.
    Tar sands  means any consolidated or unconsolidated rock (other than 
coal, oil shale, or gilsonite) that either contains a hydrocarbonaceous 
material with a gas-free viscosity greater than 10,000 centipoise at 
original reservoir temperature, or contains quarrying.



Sec. 206.52  Valuation standards.

    (a)(1) The value of production, for royalty purposes, of oil from 
leases subject to this subpart shall be the value determined under this 
section less applicable allowances determined under this subpart.
    (2)(i) For any Indian leases which provide that the Secretary may 
consider the highest price paid or offered for a major portion of 
production (major portion) in determining value for royalty purposes, if 
data are available to compute a major portion, MMS will, where 
practicable, compare the value determined in accordance with this 
section with the major portion. The value to be used in determining the 
value of production, for royalty purposes, shall be the higher of those 
two values.
    (ii) For purposes of this paragraph, major portion means the highest 
price paid or offered at the time of production for the major portion of 
oil production from the same field. The major portion will be calculated 
using like-quality oil sold under arm's-length contracts from the same 
field (or, if necessary to obtain a reasonable sample, from the same 
area) for each month. All such oil production will be arrayed from 
highest price to lowest price (at the bottom).
    The major portion is that price at which 50 percent (by volume) plus 
1 barrel of the oil (starting from the bottom) is sold.
    (b)(1)(i) The value of oil which is sold under an arm's-length 
contract shall be the gross proceeds accruing to the lessee, except as 
provided in paragraphs (b)(1)(ii) and (b)(1)(iii) of this section. The 
lessee shall have the burden of demonstrating that its contract is 
arm's-length. The value which the lessee reports, for royalty purposes, 
is subject to monitoring, review, and audit. For purposes of this 
section, oil which is sold or otherwise transferred to the lessee's 
marketing affiliate and then sold by the marketing affiliate under an 
arm's-length contract shall be valued in accordance with this paragraph 
based upon the sale by the marketing affiliate.
    (ii) In conducting reviews and audits, MMS will examine whether the 
contract reflects the total consideration actually transferred either 
directly or indirectly from the buyer to the seller for the oil. If the 
contract does not reflect the total consideration, then MMS may require 
that the oil sold

[[Page 28]]

under that contract be valued in accordance with paragraph (c) of this 
section. Value may not be less than the gross proceeds accruing to the 
lessee, including the additional consideration.
    (iii) If MMS determines that the gross proceeds accruing to the 
lessee under an arm's-length contract do not reflect the reasonable 
value of the production because of misconduct by or between two 
contracting parties, or because the lessee otherwise has breached its 
duty to the lessor to market the production for the mutual benefit of 
the lessee and the lessor, then MMS shall require that the oil 
production be valued under the first applicable of paragraph (c)(2), 
(c)(3), (c)(4), or (c)(5) of this section. When MMS determines that the 
value may be unreasonable, MMS will notify the lessee and give the 
lessee an opportunity to provide written information justifying the 
lessee's value. If the oil production is then valued under paragraph 
(c)(4) or (c)(5) of this section, the notification requirements of 
paragraph (e) of this section shall apply.
    (2) MMS may require a lessee to certify that its arm's-length 
contract provisions include all of the consideration to be paid by the 
buyer, either directly or indirectly, for the oil.
    (c) The value of oil production from leases subject to this section 
which is not sold under an arm's-length contract shall be the reasonable 
value determined in accordance with the first applicable of the 
following paragraphs:
    (1) The lessee's contemporaneous posted prices or oil sales contract 
prices used in arm's-length transactions for purchases or sales of 
significant quantities of like-quality oil in the same field (or, if 
necessary to obtain a reasonable sample, from the same area); provided, 
however, that those posted prices or oil sales contract prices are 
comparable to other contemporaneous posted prices or oil sales contract 
prices used in arm's-length transactions for purchases or sales of 
significant quantities of like-quality oil in the same field (or, if 
necessary to obtain a reasonable sample, from the same area). In 
evaluating the comparability of posted prices or oil sales contract 
prices, the following factors shall be considered: Price, duration, 
market or markets served, terms, quality of oil, volume, and other 
factors as may be appropriate to reflect the value of the oil. If the 
lessee makes arm's-length purchases or sales at different postings or 
prices, then the volume-weighted average price for the purchases or 
sales for the production month will be used;
    (2) The arithmetic average of contemporaneous posted prices used in 
arm's-length transactions by persons other than the lessee for purchases 
or sales of significant quantities of like-quality oil in the same field 
(or, if necessary to obtain a reasonable sample, from the same area);
    (3) The arithmetic average of other contemporaneous arm's-length 
contract prices for purchases or sales of significant quantities of 
like-quality oil in the same area or nearby areas;
    (4) Prices received for arm's-length spot sales of significant 
quantities of like-quality oil from the same field (or, if necessary to 
obtain a reasonable sample, from the same area), and other relevant 
matters, including information submitted by the lessee concerning 
circumstances unique to a particular lease operation or the salability 
of certain types of oil;
    (5) A net-back method or any other reasonable method to determine 
value;
    (6) For purposes of this paragraph, the term lessee includes the 
lessee's designated purchasing agent, and the term contemporaneous means 
postings or contract prices in effect at the time the royalty obligation 
is incurred.
    (d) Any Indian lessee will make available, upon request to the 
authorized MMS or Indian representatives, to the Office of the Inspector 
General of the Department of the Interior, or other persons authorized 
to receive such information, arm's-length sales and volume data for 
like-quality production sold, purchased, or otherwise obtained by the 
lessee from the field or area or from nearby fields or areas.
    (e)(1) Where the value is determined under paragraph (c) of this 
section, the lessee shall retain all data relevant to the determination 
of royalty value. Such data shall be subject to review and audit, and 
MMS will direct a lessee to use a different value if it determines that 
the reported value is inconsistent

[[Page 29]]

with the requirements of these regulations.
    (2) A lessee shall notify MMS if it has determined value under 
paragraph (c)(4) or (c)(5) of this section. The notification shall be by 
letter to MMS Associate Director for Royalty Management or his/her 
designee. The letter shall identify the valuation method to be used and 
contain a brief description of the procedure to be followed. The 
notification required by this paragraph is a one-time notification due 
no later than the end of the month following the month the lessee first 
reports royalties on a Form MMS-2014 using a valuation method authorized 
by paragraph (c)(4) or (c)(5) of this section and each time there is a 
change from one to the other of these two methods.
    (f) If MMS determines that a lessee has not properly determined 
value, the lessee shall pay the difference, if any, between royalty 
payments made based upon the value it has used and the royalty payments 
that are due based upon the value established by MMS. The lessee shall 
also pay interest on the difference computed under 30 CFR 218.54. If the 
lessee is entitled to a credit, MMS will provide instructions for the 
taking of that credit.
    (g) The lessee may request a value determination from MMS. In that 
event, the lessee shall propose to MMS a value determination method and 
may use that value for royalty payment purposes until MMS issues a value 
determination. The lessee shall submit all available data relevant to 
its proposal. MMS shall expeditiously determine the value based upon the 
lessee's proposal and any additional information MMS deems necessary. In 
making a value determination, MMS may use any of the valuation criteria 
authorized by this subpart. That determination shall remain effective 
for the period stated therein. After MMS issues its determination, the 
lessee shall make the adjustments in accordance with paragraph (f) of 
this section.
    (h) Notwithstanding any other provision of this section, under no 
circumstances shall the value of production, for royalty purposes, be 
less than the gross proceeds accruing to the lessee for lease 
production, less applicable allowances determined under this subpart.
    (i) The lessee is required to place oil in marketable condition at 
no cost to the Indian lessor unless otherwise provided in the lease 
agreement or this section. Where the value established under this 
section is determined by a lessee's gross proceeds, that value shall be 
increased to the extent that the gross proceeds have been reduced 
because the purchaser, or any other person, is providing certain 
services the cost of which ordinarily is the responsibility of the 
lessee to place the oil in marketable condition.
    (j) Value shall be based on the highest price a prudent lessee can 
receive through legally enforceable claims under its contract. Absent 
contract revision or amendment, if the lessee fails to take proper or 
timely action to receive prices or benefits to which it is entitled, it 
must pay royalty at a value based upon that obtainable price or benefit. 
Contract revisions or amendments shall be in writing and signed by all 
parties to an arm's-length contract. If the lessee makes timely 
application for a price increase or benefit allowed under its contract 
but the purchaser refuses, and the lessee takes reasonable measures, 
which are documented, to force purchaser compliance, the lessee will owe 
no additional royalties unless or until monies or consideration 
resulting from the price increase or additional benefits are received. 
This paragraph shall not be construed to permit a lessee to avoid its 
royalty payment obligation in situations where a purchaser fails to pay, 
in whole or in part or timely, for a quantity of oil.
    (k) Notwithstanding any provision in these regulations to the 
contrary, no review, reconciliation, monitoring, or other like process 
that results in a redetermination by MMS of value under this section 
shall be considered final or binding as against the Indian Tribes or 
allottees until the audit period is formally closed.
    (l) Certain information submitted to MMS to support valuation 
proposals, including transportation allowances or extraordinary cost 
allowances, is exempted from disclosure by the Freedom of Information 
Act, 5 U.S.C. 552, or other Federal law. Any data specified

[[Page 30]]

by law to be privileged, confidential, or otherwise exempt, will be 
maintained in a confidential manner in accordance with applicable laws 
and regulations. All requests for information about determinations made 
under this part are to be submitted in accordance with the Freedom of 
Information Act regulation of the Department of the Interior, 43 CFR 
part 2. Nothing in this section is intended to limit or diminish in any 
manner whatsoever the right of an Indian lessor to obtain any and all 
information to which such lessor may be lawfully entitled from MMS or 
such lessor's lessee directly under the terms of the lease, 30 U.S.C. 
1733, or other applicable law.



Sec. 206.53  Point of royalty settlement.

    (a)(1) Royalties shall be computed on the quantity and quality of 
oil as measured at the point of settlement approved by BLM for onshore 
leases.
    (2) If the value of oil determined under Sec. 206.52 of this subpart 
is based upon a quantity and/or quality different from the quantity and/
or quality at the point of royalty settlement approved by the BLM for 
onshore leases, the value shall be adjusted for those differences in 
quantity and/or quality.
    (b) No deductions may be made from the royalty volume or royalty 
value for actual or theoretical losses. Any actual loss that may be 
sustained prior to the royalty settlement metering or measurement point 
will not be subject to royalty provided that such actual loss is 
determined to have been unavoidable by BLM.
    (c) Except as provided in paragraph (b) of this section, royalties 
are due on 100 percent of the volume measured at the approved point of 
royalty settlement. There can be no reduction in that measured volume 
for actual losses beyond the approved point of royalty settlement or for 
theoretical losses that are claimed to have taken place either prior to 
or beyond the proved point of royalty settlement. Royalties are due on 
100 percent of the value of the oil as provided in this subpart. There 
can be no deduction from the value of the oil for royalty purposes to 
compensate for actual losses beyond the approved point of royalty 
settlement or for theoretical losses that are claimed to have taken 
place either prior to or beyond the approved point of royalty 
settlement.



Sec. 206.54  Transportation allowances--general.

    (a) Where the value of oil has been determined under Section 206.52 
of this subpart at a point (e.g., sales point or point of value 
determination) off the lease, MMS shall allow a deduction for the 
reasonable, actual costs incurred by the lessee to transport oil to a 
point off the lease; provided, however, that no transportation allowance 
will be granted for transporting oil taken as Royalty-In-Kind (RIK); or
    (b)(1) Except as provided in paragraph (b)(2) of this section, the 
transportation allowance deduction on the basis of a selling arrangement 
shall not exceed 50 percent of the value of the oil at the point of sale 
as determined under Sec. 206.52 of this subpart. Transportation costs 
cannot be transferred between selling arrangements or to other products.
    (2) Upon request of a lessee, MMS may approve a transportation 
allowance deduction in excess of the limitation prescribed by paragraph 
(b)(1) of this section. The lessee must demonstrate that the 
transportation costs incurred in excess of the limitation prescribed in 
paragraph (b)(1) of this section were reasonable, actual, and necessary. 
An application for exception (using Form MMS-4393, Request to Exceed 
Regulatory Allowance Limitation) shall contain all relevant and 
supporting documentation necessary for MMS to make a determination. 
Under no circumstances shall the value, for royalty purposes, under any 
selling arrangement, be reduced to zero.
    (c) Transportation costs must be allocated among all products 
produced and transported as provided in Sec. 206.55. Transportation 
allowances for oil shall be expressed as dollars per barrel.
    (d) If, after a review and/or audit, MMS determines that a lessee 
has improperly determined a transportation allowance authorized by this 
subpart, then the lessee shall pay any additional royalties, plus 
interest determined in accordance with 30 CFR

[[Page 31]]

218.54, or shall be entitled to a credit, without interest.



Sec. 206.55  Determination of transportation allowances.

    (a) Arm's-length transportation contracts. (1)(i) For transportation 
costs incurred by a lessee under an arm's-length contract, the 
transportation allowance shall be the reasonable, actual costs incurred 
by the lessee for transporting oil under that contract, except as 
provided in paragraphs (a)(1)(ii) and (a)(1)(iii) of this section, 
subject to monitoring, review, audit, and adjustment. The lessee shall 
have the burden of demonstrating that its contract is arm's-length. Such 
allowances shall be subject to the provisions of paragraph (f) of this 
section. Before any deduction may be taken, the lessee must submit a 
completed page one of Form MMS-4110 (and Schedule 1), Oil Transportation 
Allowance Report, in accordance with paragraph (c)(1) of this section. A 
transportation allowance may be claimed retroactively for a period of 
not more than 3 months prior to the first day of the month that Form 
MMS-4110 is filed with MMS, unless MMS approves a longer period upon a 
showing of good cause by the lessee.
    (ii) In conducting reviews and audits, MMS will examine whether the 
contract reflects more than the consideration actually transferred 
either directly or indirectly from the lessee to the transporter for the 
transportation. If the contract reflects more than the total 
consideration, then MMS may require that the transportation allowance be 
determined in accordance with paragraph (b) of this section.
    (iii) If MMS determines that the consideration paid under an arm's-
length transportation contract does not reflect the reasonable value of 
the transportation because of misconduct by or between the contracting 
parties, or because the lessee otherwise has breached its duty to the 
lessor to market the production for the mutual benefit of the lessee and 
the lessor, then MMS shall require that the transportation allowance be 
determined in accordance with paragraph (b) of this section. When MMS 
determines that the value of the transportation may be unreasonable, MMS 
will notify the lessee and give the lessee an opportunity to provide 
written information justifying the lessee's transportation costs.
    (2)(i) If an arm's-length transportation contract includes more than 
one liquid product, and the transportation costs attributable to each 
product cannot be determined from the contract, then the total 
transportation costs shall be allocated in a consistent and equitable 
manner to each of the liquid products transported in the same proportion 
as the ratio of the volume of each product (excluding waste products 
which have no value) to the volume of all liquid products (excluding 
waste products which have no value). Except as provided in this 
paragraph, no allowance may be taken for the costs of transporting lease 
production which is not royalty-bearing without MMS approval.
    (ii) Notwithstanding the requirements of paragraph (i), the lessee 
may propose to MMS a cost allocation method on the basis of the values 
of the products transported. MMS shall approve the method unless it 
determines that it is not consistent with the purposes of the 
regulations in this part.
    (3) If an arm's-length transportation contract includes both gaseous 
and liquid products, and the transportation costs attributable to each 
product cannot be determined from the contract, the lessee shall propose 
an allocation procedure to MMS. The lessee may use the oil 
transportation allowance determined in accordance with its proposed 
allocation procedure until MMS issues its determination on the 
acceptability of the cost allocation. The lessee shall submit all 
available data to support its proposal. The initial proposal must be 
submitted by June 30, 1988 or within 3 months after the last day of the 
month for which the lessee requests a transportation allowance, 
whichever is later (unless MMS approves a longer period). MMS shall then 
determine the oil transportation allowance based upon the lessee's 
proposal and any additional information MMS deems necessary.
    (4) Where the lessee's payments for transportation under an arm's-
length contract are not on a dollar-per-unit basis, the lessee shall 
convert whatever

[[Page 32]]

consideration is paid to a dollar value equivalent for the purposes of 
this section.
    (5) Where an arm's-length sales contract price, or a posted price, 
includes a provision whereby the listed price is reduced by a 
transportation factor, MMS will not consider the transportation factor 
to be a transportation allowance. The transportation factor may be used 
in determining the lessee's gross proceeds for the sale of the product. 
The transportation factor may not exceed 50 percent of the base price of 
the product without MMS approval.
    (b) Non-arm's-length or no contract. (1) If a lessee has a non-
arm's-length transportation contract or has no contract, including those 
situations where the lessee performs transportation services for itself, 
the transportation allowance will be based upon the lessee's reasonable, 
actual costs as provided in this paragraph. All transportation 
allowances deducted under a non-arms-length or no-contract situation are 
subject to monitoring, review, audit, and adjustment. Before any 
estimated or actual deduction may be taken, the lessee must submit a 
completed Form MMS-4110 in its entirety in accordance with paragraph 
(c)(2) of this section. A transportation allowance may be claimed 
retroactively for a period of not more than 3 months prior to the first 
day of the month that Form MMS-4110 is filed with MMS, unless MMS 
approves a longer period upon a showing of good cause by the lessee. MMS 
will monitor the allowance deductions to determine whether lessees are 
taking deductions that are reasonable and allowable. When necessary or 
appropriate, MMS may direct a lessee to modify its actual transportation 
allowance deduction.
    (2) The transportation allowance for non-arms-length or no-contract 
situations shall be based upon the lessee's actual costs for 
transportation during the reporting period, including operating and 
maintenance expenses, overhead, and either depreciation and a return on 
undepreciated capital investment in accordance with paragraph 
(b)(2)(iv)(A) of this section, or a cost equal to the initial capital 
investment in the transportation system multiplied by a rate of return 
in accordance with paragraph (b)(2)(iv)(B) of this section. Allowable 
capital costs are generally those for depreciable fixed assets 
(including costs of delivery and installation of capital equipment) 
which are an integral part of the transportation system.
    (i) Allowable operating expenses include: Operations supervision and 
engineering; operations labor; fuel; utilities; materials; ad valorem 
property taxes; rent; supplies; and any other directly allocable and 
attributable operating expense which the lessee can document.
    (ii) Allowable maintenance expenses include: Maintenance of the 
transportation system; maintenance of equipment; maintenance labor; and 
other directly allocable and attributable maintenance expenses which the 
lessee can document.
    (iii) Overhead directly attributable and allocable to the operation 
and maintenance of the transportation system is an allowable expense. 
State and Federal income taxes and severance taxes and other fees, 
including royalties, are not allowable expenses.
    (iv) A lessee may use either depreciation or a return on depreciable 
capital investment. After a lessee has elected to use either method for 
a transportation system, the lessee may not later elect to change to the 
other alternative without approval of MMS.
    (A) To compute depreciation, the lessee may elect to use either a 
straight-line depreciation method based on the life of equipment or on 
the life of the reserves which the transportation system services or on 
a unit-of-production method. After an election is made, the lessee may 
not change methods without MMS approval. A change in ownership of a 
transportation system shall not alter the depreciation schedule 
established by the original transporter/lessee for purposes of the 
allowance calculation. With or without a change in ownership, a 
transportation system shall be depreciated only once. Equipment shall 
not be depreciated below a reasonable salvage value.
    (B) MMS shall allow as a cost an amount equal to the initial capital 
investment in the transportation system multiplied by the rate of return 
determined under paragraph (b)(2)(v) of this

[[Page 33]]

section. No allowance shall be provided for depreciation. This 
alternative shall apply only to transportation facilities first placed 
in service after March 1, 1988.
    (v) The rate of return shall be the industrial rate associated with 
Standard and Poor's BBB rating. The rate of return shall be the monthly 
average rate as published in Standard and Poor's Bond Guide for the 
first month of the reporting period for which the allowance is 
applicable and shall be effective during the reporting period. The rate 
shall be redetermined at the beginning of each subsequent transportation 
allowance reporting period (which is determined under paragraph (c) of 
this section).
    (3)(i) The deduction for transportation costs shall be determined on 
the basis of the lessee's cost of transporting each product through each 
individual transportation system. Where more than one liquid product is 
transported, allocation of costs to each of the liquid products 
transported shall be in the same proportion as the ratio of the volume 
of each liquid product (excluding waste products which have no value) to 
the volume of all liquid products (excluding waste products which have 
no value) and such allocation shall be made in a consistent and 
equitable manner. Except as provided in this paragraph, the lessee may 
not take an allowance for transporting lease production which is not 
royalty-bearing without MMS approval.
    (ii) Notwithstanding the requirements of paragraph (i), the lessee 
may propose to MMS a cost allocation method on the basis of the values 
of the products transported. MMS shall approve the method unless it 
determines that it is not consistent with the purposes of the 
regulations in this part.
    (4) Where both gaseous and liquid products are transported through 
the same transportation system, the lessee shall propose a cost 
allocation procedure to MMS. The lessee may use the oil transportation 
allowance determined in accordance with its proposed allocation 
procedure until MMS issues its determination on the acceptability of the 
cost allocation. The lessee shall submit all available data to support 
its proposal. The initial proposal must be submitted by June 30, 1988 or 
within 3 months after the last day of the month for which the lessee 
requests a transportation allowance, whichever is later (unless MMS 
approves a longer period). MMS shall then determine the oil 
transportation allowance on the basis of the lessee's proposal and any 
additional information MMS deems necessary.
    (5) A lessee may apply to MMS for an exception from the requirement 
that it compute actual costs in accordance with paragraphs (b)(1) 
through (b)(4) of this section. MMS will grant the exception only if the 
lessee has a tariff for the transportation system approved by the 
Federal Energy Regulatory Commission (FERC) for Indian leases. MMS shall 
deny the exception request if it determines that the tariff is excessive 
as compared to arm's-length transportation charges by pipelines, owned 
by the lessee or others, providing similar transportation services in 
that area. If there are no arm's-length transportation charges, MMS 
shall deny the exception request if:
    (i) No FERC cost analysis exists and the FERC has declined to 
investigate under MMS timely objections upon filing; and
    (ii) the tariff significantly exceeds the lessee's actual costs for 
transportation as determined under this section.
    (c) Reporting requirements. (1) Arm's-length contracts. (i) With the 
exception of those transportation allowances specified in paragraphs 
(c)(1)(v) and (c)(1)(vi) of this section, the lessee shall submit page 
one of the initial Form MMS-4110 (and Schedule 1), Oil Transportation 
Allowance Report, prior to, or at the same time as, the transportation 
allowance determined, under an arm's-length contract, is reported on 
Form MMS-2014, Report of Sales and Royalty Remittance. A Form MMS-4110 
received by the end of the month that the Form MMS-2014 is due shall be 
considered to be timely received.
    (ii) The initial Form MMS-4110 shall be effective for a reporting 
period beginning the month that the lessee is first authorized to deduct 
a transportation allowance and shall continue

[[Page 34]]

until the end of the calendar year, or until the applicable contract or 
rate terminates or is modified or amended, whichever is earlier.
    (iii) After the initial reporting period and for succeeding 
reporting periods, lessees must submit page one of Form MMS-4110 (and 
Schedule 1) within 3 months after the end of the calendar year, or after 
the applicable contract or rate terminates or is modified or amended, 
whichever is earlier, unless MMS approves a longer period (during which 
period the lessee shall continue to use the allowance from the previous 
reporting period).
    (iv) MMS may require that a lessee submit arm's-length 
transportation contracts, production agreements, operating agreements, 
and related documents. Documents shall be submitted within a reasonable 
time, as determined by MMS.
    (v) Transportation allowances which are based on arm's-length 
contracts and which are in effect at the time these regulations become 
effective will be allowed to continue until such allowances terminate. 
For the purposes of this section, only those allowances that have been 
approved by MMS in writing shall qualify as being in effect at the time 
these regulations become effective.
    (vi) MMS may establish, in appropriate circumstances, reporting 
requirements which are different from the requirements of this section.
    (2) Non-arm's-length or no contract. (i) With the exception of those 
transportation allowances specified in paragraphs (c)(2)(v), (c)(2)(vii) 
and (c)(2)(viii) of this section, the lessee shall submit an initial 
Form MMS-4110 prior to, or at the same time as, the transportation 
allowance determined under a non-arm's-length contract or no-contract 
situation is reported on Form MMS-2014. A Form MMS-4110 received by the 
end of the month that the Form MMS-2014 is due shall be considered to be 
timely received. The initial report may be based upon estimated costs.
    (ii) The initial Form MMS-4110 shall be effective for a reporting 
period beginning the month that the lessee first is authorized to deduct 
a transportation allowance and shall continue until the end of the 
calendar year, or until transportation under the non-arm's-length 
contract or the no-contract situation terminates, whichever is earlier.
    (iii) For calendar-year reporting periods succeeding the initial 
reporting period, the lessee shall submit a completed Form MMS-4110 
containing the actual costs for the previous reporting period. If oil 
transportation is continuing, the lessee shall include on Form MMS-4110 
its estimated costs for the next calendar year. The estimated oil 
transportation allowance shall be based on the actual costs for the 
previous reporting period plus or minus any adjustments which are based 
on the lessee's knowledge of decreases or increases that will affect the 
allowance. MMS must receive the Form MMS-4110 within 3 months after the 
end of the previous reporting period, unless MMS approves a longer 
period (during which period the lessee shall continue to use the 
allowance from the previous reporting period).
    (iv) For new transportation facilities or arrangements, the lessee's 
initial Form MMS-4110 shall include estimates of the allowable oil 
transportation costs for the applicable period. Cost estimates shall be 
based upon the most recently available operations data for the 
transportation system or, if such data are not available, the lessee 
shall use estimates based upon industry data for similar transportation 
systems.
    (v) Non-arm's-length contract or no-contract transportation 
allowances which are in effect at the time these regulations become 
effective will be allowed to continue until such allowances terminate. 
For the purposes of this section, only those allowances that have been 
approved by MMS in writing shall qualify as being in effect at the time 
these regulations become effective.
    (vi) Upon request by MMS, the lessee shall submit all data used to 
prepare its Form MMS-4110. The data shall be provided within a 
reasonable period of time, as determined by MMS.
    (vii) MMS may establish, in appropriate circumstances, reporting 
requirements which are different from the requirements of this section.

[[Page 35]]

    (viii) If the lessee is authorized to use its FERC-approved tariff 
as its transportation cost in accordance with paragraph (b)(5) of this 
section, it shall follow the reporting requirements of paragraph (c)(1) 
of this section.
    (3) MMS may establish reporting dates for individual lessees 
different from those specified in this subpart in order to provide more 
effective administration. Lessees will be notified of any change in 
their reporting period.
    (4) Transportation allowances must be reported as a separate line 
item on Form MMS-2014, unless MMS approves a different reporting 
procedure.
    (d) Interest assessments for incorrect or late reports and for 
failure to report. (1) If a lessee deducts a transportation allowance on 
its Form MMS-2014 without complying with the requirements of this 
section, the lessee shall pay interest only on the amount of such 
deduction until the requirements of this section are complied with. The 
lessee also shall repay the amount of any allowance which is disallowed 
by this section.
    (2) If a lessee erroneously reports a transportation allowance which 
results in an underpayment of royalties, interest shall be paid on the 
amount of that underpayment.
    (3) Interest required to be paid by this section shall be determined 
in accordance with 30 CFR 218.54.
    (e) Adjustments. (1) If the actual transportation allowance is less 
than the amount the lessee has taken on Form MMS-2014 for each month 
during the allowance form reporting period, the lessee shall be required 
to pay additional royalties due plus interest computed under 30 CFR 
218.54, retroactive to the first day of the first month the lessee is 
authorized to deduct a transportation allowance. If the actual 
transportation allowance is greater than the amount the lessee has taken 
on Form MMS-2014 for each month during the allowance form reporting 
period, the lessee shall be entitled to a credit without interest.
    (2) For lessees transporting production from Indian leases, the 
lessee must submit a corrected Form MMS-2014 to reflect actual costs, 
together with any payment, in accordance with instructions provided by 
MMS.
    (f) Actual or theoretical losses. Notwithstanding any other 
provisions of this subpart, for other than arm's-length contracts, no 
cost shall be allowed for oil transportation which results from payments 
(either volumetric or for value) for actual or theoretical losses. This 
section does not apply when the transportation allowance is based upon a 
FERC or State regulatory agency approved tariff.
    (g) Other transportation cost determinations. The provisions of this 
section shall apply to determine transportation costs when establishing 
value using a netback valuation procedure or any other procedure that 
requires deduction of transportation costs.



                         Subpart C--Federal Oil

    Source:  53 FR 1218-1222, Jan. 15, 1988, unless otherwise noted.



Sec. 206.100  Purpose and scope.

    (a) This subpart is applicable to all oil production from Federal 
oil and gas leases. The purpose of this subpart is to establish the 
value of production, for royalty purposes, consistent with the mineral 
leasing laws, other applicable laws, and lease terms.
    (b) If the specific provisions of any Federal statute, settlement 
agreement between the United States and a lessee resulting from 
administrative or judicial litigation, or oil and gas lease subject to 
the requirements of this subpart are inconsistent with any regulation in 
this subpart, then the statute, lease provision or settlement agreement 
shall govern to the extent of that inconsistency.
    (c) All royalty payments made to MMS are subject to audit and 
adjustment.
    (d) The regulations in this subpart are intended to ensure that the 
trust responsibilities of the United States with respect to the 
administration of Indian oil and gas leases are discharged in accordance 
with the requirements of the governing mineral leasing laws, treaties, 
and lease terms.

[53 FR 1218-1222, Jan. 15, 1988, as amended at 61 FR 5462, Feb. 12, 
1996]



Sec. 206.101  Definitions.

    For the purposes of this subpart:

[[Page 36]]

    Allowance means a deduction in determining value for royalty 
purposes. Transportation allowance means an allowance for the 
reasonable, actual costs incurred by the lessee for moving oil to a 
point of sale or point of delivery off the lease, unit area, or 
communitized area, excluding gathering.
    Area means a geographic region at least as large as the defined 
limits of an oil and/or gas field in which oil and/or gas lease products 
have similar quality, economic, and legal characteristics.
    Arm's-length contract means a contract or agreement that has been 
arrived at in the market place between independent, nonaffiliated 
persons with opposing economic interests regarding that contract. For 
purposes of this subpart, two persons are affiliated if one person 
controls, is controlled by, or is under common control with another 
person. For purposes of this subpart, based on the instruments of 
ownership of the voting securities of an entity, or based on other forms 
of ownership:
    (a) Ownership in excess of 50 percent constitutes control;
    (b) Ownership of 10 through 50 percent creates a presumption of 
control; and
    (c) Ownership of less than 10 percent creates a presumption of 
noncontrol which MMS may rebut if it demonstrates actual or legal 
control, including the existence of interlocking directorates.

Notwithstanding any other provisions of this subpart, contracts between 
relatives, either by blood or by marriage, are not arm's-length 
contracts. The MMS may require the lessee to certify ownership control. 
To be considered arm's-length for any production month, a contract must 
meet the requirements of this definition for that production month, as 
well as when the contract was executed.
    Audit means a review, conducted in accordance with generally 
accepted accounting and auditing standards, of royalty payment 
compliance activities of lessees or other interest holders who pay 
royalties, rents, or bonuses on Federal leases.
    BLM means the Bureau of Land Management of the Department of the 
Interior.
    Condensate means liquid hydrocarbons (normally exceeding 40 degrees 
of API gravity) recovered at the surface without resorting to 
processing. Condensate is the mixture of liquid hydrocarbons that 
results from condensation of petroleum hydrocarbons existing initially 
in a gaseous phase in an underground reservoir.
    Contract means any oral or written agreement, including amendments 
or revisions thereto, between two or more persons and enforceable by law 
that with due consideration creates an obligation.
    Field means a geographic region situated over one or more subsurface 
oil and gas reservoirs encompassing at least the outermost boundaries of 
all oil and gas accumulations known to be within those reservoirs 
vertically projected to the land surface. Onshore fields are usually 
given names and their official boundaries are often designated by oil 
and gas regulatory agencies in the respective States in which the fields 
are located. Outer Continental Shelf (OCS) fields are named and their 
boundaries are designated by MMS.
    Gathering means the movement of lease production to a central 
accumulation or treatment point on the lease, unit, or communitized 
area, or to a central accumulation or treatment point off the lease, 
unit, or communitized area as approved by BLM or MMS OCS operations 
personnel for onshore and offshore leases, respectively.
    Gross proceeds (for royalty payment purposes) means the total moneys 
and other consideration accruing to an oil and gas lessee for the 
disposition of the oil produced. Gross proceeds includes, but is not 
limited to, payments to the lessee for certain services such as 
dehydration, measurement, and/or gathering to the extent that the lessee 
is obligated to perform them at no cost to the Federal Government. Gross 
proceeds, as applied to oil, also includes, but is not limited to, 
reimbursements for harboring or terminaling fees. Tax reimbursements are 
part of the gross proceeds accruing to a lessee even

[[Page 37]]

though the Federal royalty interest may be exempt from taxation. Moneys 
and other consideration, including the forms of consideration identified 
in this paragraph, to which a lessee is contractually or legally 
entitled but which it does not seek to collect through reasonable 
efforts are also part of gross proceeds.
    Lease means any contract, profit-share arrangement, joint venture, 
or other agreement issued or approved by the United States under a 
mineral leasing law that authorizes exploration for, development or 
extraction of, or removal of lease products--or the land area covered by 
that authorization, whichever is required by the context.
    Lease products means any leased minerals attributable to, 
originating from, or allocated to Outer Continental Shelf or onshore 
Federal leases.
    Lessee means any person to whom the United States issues a lease, 
and any person who has been assigned an obligation to make royalty or 
other payments required by the lease. This includes any person who has 
an interest in a lease as well as an operator or payor who has no 
interest in the lease but who has assumed the royalty payment 
responsibility.
    Like-quality lease products means lease products which have similar 
chemical, physical, and legal characteristics.
    Load oil means any oil which has been used with respect to the 
operation of oil or gas wells for wellbore stimulation, workover, 
chemical treatment, or production purposes. It does not include oil used 
at the surface to place lease production in marketable condition.
    Marketable condition means lease products which are sufficiently 
free from impurities and otherwise in a condition that they will be 
accepted by a purchaser under a sales contract typical for the field or 
area.
    Marketing affiliate means an affiliate of the lessee whose function 
is to acquire only the lessee's production and to market that 
production.
    Minimum royalty means that minimum amount of annual royalty that the 
lessee must pay as specified in the lease or in applicable leasing 
regulations.
    Net-back method (or workback method) means a method for calculating 
market value of oil at the lease. Under this method, costs of 
transportation, processing, or manufacturing are deducted from the 
proceeds received for the oil and any extracted, processed, or 
manufactured products, or from the value of the oil or any extracted, 
processed, or manufactured products at the first point at which 
reasonable values for any such products may be determined by a sale 
pursuant to an arm's-length contract or comparison to other sales of 
such products, to ascertain value at the lease.
    Net profit share (for applicable Federal leases) means the specified 
share of the net profit from production of oil and gas as provided in 
the agreement.
    Netting is the deduction of an allowance from the sales value by 
reporting a one line net sales value, instead of correctly reporting the 
deduction as a separate line item on the Form MMS-2014.
    Oil means a mixture of hydrocarbons that existed in the liquid phase 
in natural underground reservoirs and remains liquid at atmospheric 
pressure after passing through surface separating facilities and is 
marketed or used as such. Condensate recovered in lease separators or 
field facilities is considered to be oil. For purposes of royalty 
valuation, the term tar sands is defined separately from oil.
    Oil shale means a kerogen-bearing rock (i.e., fossilized, insoluble, 
organic material). Separation of kerogen from oil shale may take place 
in situ or in surface retorts by various processes. The kerogen, upon 
distillation, will yield liquid and gaseous hydrocarbons.
    Outer Continental Shelf (OCS) means all submerged lands lying 
seaward and outside of the area of lands beneath navigable waters as 
defined in section 2 of the Submerged Lands Act (43 U.S.C. 1301) and of 
which the subsoil and seabed appertain to the United States and are 
subject to its jurisdiction and control.
    Person means any individual, firm, corporation, association, 
partnership, consortium, or joint venture (when established as a 
separate entity).

[[Page 38]]

    Posted price means the price specified in publicly available posted 
price bulletins, offshore or onshore terminal postings, or other price 
notices net of all adjustments for quality (e.g., API gravity, sulfur 
content, etc.) and location for oil in marketable condition.
    Processing means any process designed to remove elements or 
compounds (hydrocarbon and nonhydrocarbon) from gas, including 
absorption, adsorption, or refrigeration. Field processes which normally 
take place on or near the lease, such as natural pressure reduction, 
mechanical separation, heating, cooling, dehydration, and compression 
are not considered processing. The changing of pressures and/or 
temperatures in a reservoir is not considered processing.
    Section 6 lease means an OCS lease subject to section 6 of the Outer 
Continental Shelf Lands Act, as amended, 43 U.S.C. 1335.
    Selling arrangement means the individual contractual arrangements 
under which sales or dispositions of oil are made. Selling arrangements 
are described by illustration in the MMS Royalty Management Program (Oil 
and Gas or Solid Minerals) Payor Handbook.
    Spot sales agreement means a contract wherein a seller agrees to 
sell to a buyer a specified amount of oil at a specified price over a 
fixed period, usually of short duration, which does not normally require 
a cancellation notice to terminate, and which does not contain an 
obligation, nor imply an intent, to continue in subsequent periods.
    Tar sands means any consolidated or unconsolidated rock (other than 
coal, oil shale, or gilsonite) that either contains a hydrocarbonaceous 
material with a gas-free viscosity greater than 10,000 centipoise at 
original reservoir temperature, or contains a hydrocarbonaceous material 
and is produced by mining or quarrying.

[53 FR 1218-1222, Jan. 15, 1988, as amended at 53 FR 45084, Nov. 8, 
1988; 61 FR 5462, Feb. 12, 1996]



Sec. 206.102  Valuation standards.

    (a) The value of production, for royalty purposes, of oil from 
leases subject to this subpart shall be the value determined pursuant to 
this section less applicable allowances determined pursuant to this 
subpart.
    (b)(1)(i) The value of oil which is sold pursuant to an arm's-length 
contract shall be the gross proceeds accruing to the lessee, except as 
provided in paragraphs (b)(1) (ii) and (iii) of this section. The lessee 
shall have the burden of demonstrating that its contract is arm's-
length. The value which the lessee reports, for royalty purposes, is 
subject to monitoring, review, and audit. For purposes of this section, 
oil which is sold or otherwise transferred to the lessee's marketing 
affiliate and then sold by the marketing affiliate pursuant to an arm's-
length contract shall be valued in accordance with this paragraph based 
upon the sale by the marketing affiliate.
    (ii) In conducting reviews and audits, MMS will examine whether the 
contract reflects the total consideration actually transferred either 
directly or indirectly from the buyer to the seller for the oil. If the 
contract does not reflect the total consideration, then the MMS may 
require that the oil sold pursuant to that contract be valued in 
accordance with paragraph (c) of this section. Value may not be less 
than the gross proceeds accruing to the lessee, including the additional 
consideration.
    (iii) If the MMS determines that the gross proceeds accruing to the 
lessee pursuant to an arm's-length contract do not reflect the 
reasonable value of the production because of misconduct by or between 
two contracting parties, or because the lessee otherwise has breached 
its duty to the lessor to market the production for the mutual benefit 
of the lessee and the lessor, then MMS shall require that the oil 
production be valued pursuant to the first applicable of paragraph (c) 
(2), (3), (4), or (5) of this section. When MMS determines that the 
value may be unreasonable, MMS will notify the lessee and give the 
lessee an opportunity to provide written information justifying the 
lessee's value. If the oil production is then valued pursuant to 
paragraph (c)(4) or (c)(5) of this section, the notification 
requirements of paragraph (e) of this section shall apply.
    (2) The MMS may require a lessee to certify that its arm's-length 
contract

[[Page 39]]

provisions include all of the consideration to be paid by the buyer, 
either directly or indirectly, for the oil.
    (c) The value of oil production from leases subject to this section 
which is not sold pursuant to an arm's-length contract shall be the 
reasonable value determined in accordance with the first applicable of 
the following paragraphs:
    (1) The lessee's contemporaneous posted prices or oil sales contract 
prices used in arm's-length transactions for purchases or sales of 
significant quantities of like-quality oil in the same field (or, if 
necessary to obtain a reasonable sample, from the same area); provided, 
however, that those posted prices or oil sales contract prices are 
comparable to other contemporaneous posted prices or oil sales contract 
prices used in arm's-length transactions for purchases or sales of 
significant quantities of like-quality oil in the same field (or, if 
necessary to obtain a reasonable sample, from the same area). In 
evaluating the comparability of posted prices or oil sales contract 
prices, the following factors shall be considered: Price, duration, 
market or markets served, terms, quality of oil, volume, and other 
factors as may be appropriate to reflect the value of the oil. If the 
lessee makes arm's-length purchases or sales at different postings or 
prices, then the volume-weighted average price for the purchases or 
sales for the production month will be used;
    (2) The arithmetic average of contemporaneous posted prices used in 
arm's-length transactions by persons other than the lessee for purchases 
or sales of significant quantities of like-quality oil in the same field 
(or, if necessary to obtain a reasonable sample, from the same area);
    (3) The arithmetic average of other contemporaneous arm's-length 
contract prices for purchases or sales of significant quantities of 
like-quality oil in the same area or nearby areas;
    (4) Prices received for arm's-length spot sales of significant 
quantities of like-quality oil from the same field (or, if necessary to 
obtain a reasonable sample, from the same area), and other relevant 
matters, including information submitted by the lessee concerning 
circumstances unique to a particular lease operation or the saleability 
of certain types of oil;
    (5) A net-back method or any other reasonable method to determine 
value;
    (6) For purposes of this paragraph, the term lessee includes the 
lessee's designated purchasing agent, and the term contemporaneous means 
postings or contract prices in effect at the time the royalty obligation 
is incurred.
    (d) Any Federal lessee will make available, upon request to the 
authorized MMS or State representatives, to the Office of the Inspector 
General of the Department of the Interior, or other persons authorized 
to receive such information, arm's-length sales and volume data for 
like-quality production sold, purchased, or otherwise obtained by the 
lessee from the field or area or from nearby fields or areas.
    (e)(1) Where the value is determined pursuant to paragraph (c) of 
this section, the lessee shall retain all data relevant to the 
determination of royalty value. Such data shall be subject to review and 
audit, and MMS will direct a lessee to use a different value if it 
determines that the reported value is inconsistent with the requirements 
of these regulations.
    (2) A lessee shall notify MMS if it has determined value pursuant to 
paragraph (c)(4) or (c)(5) of this section. The notification shall be by 
letter to the MMS Associate Director for Royalty Management or his/her 
designee. The letter shall identify the valuation method to be used and 
contain a brief description of the procedure to be followed. The 
notification required by this paragraph is a one-time notification due 
no later than the end of the month following the month the lessee first 
reports royalties on a Form MMS-2014 using a valuation method authorized 
by paragraph (c)(4) or (c)(5) of this section and each time there is a 
change from one to the other of these two methods.
    (f) If MMS determines that a lessee has not properly determined 
value, the lessee shall pay the difference, if any, between royalty 
payments made based upon the value it has used and the royalty payments 
that are due based upon the value established by MMS. The lessee shall 
also pay interest on the difference computed pursuant to 30 CFR

[[Page 40]]

218.54. If the lessee is entitled to a credit, MMS will provide 
instructions for the taking of that credit.
    (g) The lessee may request a value determination from MMS. In that 
event, the lessee shall propose to MMS a value determination method and 
may use that value for royalty payment purposes until MMS issues a value 
determination. The lessee shall submit all available data relevant to 
its proposal. MMS shall expeditiously determine the value based upon the 
lessee's proposal and any additional information MMS deems necessary. In 
making a value determination, MMS may use any of the valuation criteria 
authorized by this subpart. That determination shall remain effective 
for the period stated therein. After MMS issues its determination, the 
lessee shall make the adjustments in accordance with paragraph (f) of 
this section.
    (h) Notwithstanding any other provision of this section, under no 
circumstances shall the value of production, for royalty purposes, be 
less than the gross proceeds accruing to the lessee for lease 
production, less applicable allowances determined pursuant to this 
subpart.
    (i) The lessee is required to place oil in marketable condition at 
no cost to the Federal Government unless otherwise provided in the lease 
agreement or this section. Where the value established under this 
section is determined by a lessee's gross proceeds, that value shall be 
increased to the extent that the gross proceeds have been reduced 
because the purchaser, or any other person, is providing certain 
services the cost of which ordinarily is the responsibility of the 
lessee to place the oil in marketable condition.
    (j) Value shall be based on the highest price a prudent lessee can 
receive through legally enforceable claims under its contract. Absent 
contract revision or amendment, if the lessee fails to take proper or 
timely action to receive prices or benefits to which it is entitled, it 
must pay royalty at a value based upon that obtainable price or benefit. 
Contract revisions or amendments shall be in writing and signed by all 
parties to an arm's-length contract. If the lessee makes timely 
application for a price increase or benefit allowed under its contract 
but the purchaser refuses, and the lessee takes reasonable measures, 
which are documented, to force purchaser compliance, the lessee will owe 
no additional royalties unless or until monies or consideration 
resulting from the price increase or additional benefits are received. 
This paragraph shall not be construed to permit a lessee to avoid its 
royalty payment obligation in situations where a purchaser fails to pay, 
in whole or in part or timely, for a quantity of oil.
    (k) Notwithstanding any provision in these regulations to the 
contrary, no review, reconciliation, monitoring, or other like process 
that results in a redetermination by MMS of value under this section 
shall be considered final or binding as against the Federal Government 
or its beneficiaries until the audit period is formally closed.
    (l) Certain information submitted to MMS to support valuation 
proposals, including transportation allowances or extraordinary cost 
allowances, is exempted from disclosure by the Freedom of Information 
Act, 5 U.S.C. 552, or other Federal law. Any data specified by law to be 
privileged, confidential, or otherwise exempt, will be maintained in a 
confidential manner in accordance with applicable laws and regulations. 
All requests for information about determinations made under this part 
are to be submitted in accordance with the Freedom of Information Act 
regulation of the Department of the Interior, 43 CFR part 2.

[53 FR 1213-1222, Jan. 15, 1988, as amended at 53 FR 45762, Nov. 14, 
1988; 61 FR 5462, Feb. 12, 1996]



Sec. 206.103  Point of royalty settlement.

    (a)(1) Royalties shall be computed on the quantity and quality of 
oil as measured at the point of settlement approved by BLM or MMS for 
onshore and offshore leases, respectively.
    (2) If the value of oil determined pursuant to Sec. 206.102 of this 
subpart is based upon a quantity and/or quality different from the 
quantity and/or quality at the point of royalty settlement approved by 
the BLM for onshore leases or the MMS for offshore leases, the value 
shall be adjusted for those differences in quantity and/or quality.

[[Page 41]]

    (b) No deductions may be made from the royalty volume or royalty 
value for actual or theoretical losses. Any actual loss that may be 
sustained prior to the royalty settlement metering or measurement point 
will not be subject to royalty provided that such actual loss is 
determined to have been unavoidable by BLM or MMS, as appropriate.
    (c) Except as provided in paragraph (b) of this section, royalties 
are due on 100 percent of the volume measured at the approved point of 
royalty settlement. There can be no reduction in that measured volume 
for actual losses beyond the approved point of royalty settlement or for 
theoretical losses that are claimed to have taken place either prior to 
or beyond the approved point of royalty settlement. Royalties are due on 
100 percent of the value of the oil as provided in this part. There can 
be no deduction from the value of the oil for royalty purposes to 
compensate for actual losses beyond the approved point of royalty 
settlement or for theoretical losses that are claimed to have taken 
place either prior to or beyond the approved point of royalty 
settlement.



Sec. 206.104  Transportation allowances--general.

    (a) Where the value of oil has been determined pursuant to 
Sec. 206.102 of this subpart at a point (e.g., sales point or point of 
value determination) off the lease, MMS shall allow a deduction for the 
reasonable, actual costs incurred by the lessee to:
    (1) Transport oil from an onshore lease to the point off the lease; 
Provided, however, That for onshore leases, no transportation allowance 
will be granted for transporting oil taken as Royalty-In-Kind (RIK); or
    (2) Transport oil from an offshore lease to the point off the lease; 
provided, however, that for oil taken as RIK, a transportation allowance 
shall be provided for the reasonable actual costs incurred to transport 
that oil to the delivery point specified in the contract between the RIK 
oil purchaser and the Federal Government.
    (b)(1) Except as provided in paragraph (b)(2) of this section, the 
transportation allowance deduction on the basis of a selling arrangement 
shall not exceed 50 percent of the value of the oil at the point of sale 
as determined pursuant to Sec. 206.102 of this subpart. Transportation 
costs cannot be transferred between selling arrangements or to other 
products.
    (2) Upon request of a lessee, MMS may approve a transportation 
allowance deduction in excess of the limitation prescribed by paragraph 
(b)(1) of this section. The lessee must demonstrate that the 
transportation costs incurred in excess of the limitation prescribed in 
paragraph (b)(1) of this section were reasonable, actual, and necessary. 
An application for exception (using Form MMS-4393, Request to Exceed 
Regulatory Allowance Limitation) shall contain all relevant and 
supporting documentation necessary for MMS to make a determination. 
Under no circumstances shall the value, for royalty purposes, under any 
selling arrangement, be reduced to zero.
    (c) Transportation costs must be allocated among all products 
produced and transported as provided in Sec. 206.105. Transportation 
allowances for oil shall be expressed as dollars per barrel.
    (d) If, after a review and/or audit, MMS determines that a lessee 
has improperly determined a transportation allowance authorized by this 
subpart, then the lessee shall pay any additional royalties, plus 
interest determined in accordance with 30 CFR 218.54, or shall be 
entitled to a credit, without interest. If the lessee takes a deduction 
for transportation on the Form MMS-2014 by improperly netting the 
allowance against the sales value of the oil instead of reporting the 
allowance as a separate line item, the lessee may be assessed an amount 
under Sec. 206.105(d).

[53 FR 1218-1222, Jan. 15, 1988; 53 FR 24688, June 30, 1988; 53 FR 
45762, Nov. 14, 1988; 61 FR 5463, Feb. 12, 1996]



Sec. 206.105  Determination of transportation allowances.

    (a)Arm's-length transportation contracts. (1)(i) For transportation 
costs incurred by a lessee under an arm's-length contract, the 
transportation allowance shall be the reasonable, actual costs incurred 
by the lessee for transporting oil under that contract, except

[[Page 42]]

as provided in paragraphs (a)(1)(ii) and (a)(1)(iii) of this section, 
subject to monitoring, review, audit, and adjustment. The lessee shall 
have the burden of demonstrating that its contract is arm's-length. MMS' 
prior approval is not required before a lessee may deduct costs incurred 
under an arm's-length contract. Such allowances shall be subject to the 
provisions of paragraph (f) of this section. The lessee must claim a 
transportation allowance by reporting it as a separate line entry on the 
Form MMS-2014.
    (ii) In conducting reviews and audits, MMS will examine whether the 
contract reflects more than the consideration actually transferred 
either directly or indirectly from the lessee to the transporter for the 
transportation. If the contract reflects more than the total 
consideration, then the MMS may require that the transportation 
allowance be determined in accordance with paragraph (b) of this 
section.
    (iii) If the MMS determines that the consideration paid pursuant to 
an arm's-length transportation contract does not reflect the reasonable 
value of the transportation because of misconduct by or between the 
contracting parties, or because the lessee otherwise has breached its 
duty to the lessor to market the production for the mutual benefit of 
the lessee and the lessor, then MMS shall require that the 
transportation allowance be determined in accordance with paragraph (b) 
of this section. When MMS determines that the value of the 
transportation may be unreasonable, MMS will notify the lessee and give 
the lessee an opportunity to provide written information justifying the 
lessee's transportation costs.
    (2)(i) If an arm's-length transportation contract includes more than 
one liquid product, and the transportation costs attributable to each 
product cannot be determined from the contract, then the total 
transportation costs shall be allocated in a consistent and equitable 
manner to each of the liquid products transported in the same proportion 
as the ratio of the volume of each product (excluding waste products 
which have no value) to the volume of all liquid products (excluding 
waste products which have no value). Except as provided in this 
paragraph, no allowance may be taken for the costs of transporting lease 
production which is not royalty-bearing without MMS approval.
     (ii) Notwithstanding the requirements of paragraph (i), the lessee 
may propose to MMS a cost allocation method on the basis of the values 
of the products transported. The MMS shall approve the method unless it 
determines that it is not consistent with the purposes of the 
regulations in this part.
    (3) If an arm's-length transportation contract includes both gaseous 
and liquid products, and the transportation costs attributable to each 
product cannot be determined from the contract, the lessee shall propose 
an allocation procedure to MMS. The lessee may use the oil 
transportation allowance determined in accordance with its proposed 
allocation procedure until MMS issues its determination on the 
acceptability of the cost allocation. The lessee shall submit all 
available data to support its proposal. The initial proposal must be 
submitted within 3 months after the last day of the month for which the 
lessee requests a transportation allowance. MMS shall then determine the 
oil transportation allowance based upon the lessee's proposal and any 
additional information MMS deems necessary.
    (4) Where the lessee's payments for transportation under an arm's-
length contract are not on a dollar-per-unit basis, the lessee shall 
convert whatever consideration is paid to a dollar value equivalent for 
the purposes of this section.
    (5) Where an arm's-length sales contract price, or a posted price, 
includes a provision whereby the listed price is reduced by a 
transportation factor, MMS will not consider the transportation factor 
to be a transportation allowance. The transportation factor may be used 
in determining the lessee's gross proceeds for the sale of the product. 
The transportation factor may not exceed 50 percent of the base price of 
the product without MMS approval.
    (b) Non-arm's-length or no contract. (1) If a lessee has a non-
arm's-length transportation contract or has no contract, including those 
situations where the lessee performs transportation

[[Page 43]]

services for itself, the transportation allowance will be based upon the 
lessee's reasonable, actual costs as provided in this paragraph. All 
transportation allowances deducted under a non-arms-length or no-
contract situation are subject to monitoring, review, audit, and 
adjustment to ensure that they are reasonable and allowable. The lessee 
must claim a transportation allowance by reporting it as a separate line 
entry on the Form MMS-2014. When necessary or appropriate, MMS may 
direct a lessee to modify its estimated or actual transportation 
allowance deduction.
    (2) The transportation allowance for non-arms-length or no-contract 
situations shall be based upon the lessee's actual costs for 
transportation during the reporting period, including operating and 
maintenance expenses, overhead, and either depreciation and a return on 
undepreciated capital investment in accordance with paragraph 
(b)(2)(iv)(A) of this section, or a cost equal to the initial capital 
investment in the transportation system multiplied by a rate of return 
in accordance with paragraph (b)(2)(iv)(B) of this section. Allowable 
capital costs are generally those for depreciable fixed assets 
(including costs of delivery and installation of capital equipment) 
which are an integral part of the transportation system.
    (i) Allowable operating expenses include: Operations supervision and 
engineering; operations labor; fuel; utilities; materials; ad valorem 
property taxes; rent; supplies; and any other directly allocable and 
attributable operating expense which the lessee can document.
    (ii) Allowable maintenance expenses include: Maintenance of the 
transportation system; maintenance of equipment; maintenance labor; and 
other directly allocable and attributable maintenance expenses which the 
lessee can document.
    (iii) Overhead directly attributable and allocable to the operation 
and maintenance of the transportation system is an allowable expense. 
State and Federal income taxes and severance taxes and other fees, 
including royalties, are not allowable expenses.
    (iv) A lessee may use either depreciation or a return on depreciable 
capital investment. After a lessee has elected to use either method for 
a transportation system, the lessee may not later elect to change to the 
other alternative without approval of the MMS.
    (A) To compute depreciation, the lessee may elect to use either a 
straight-line depreciation method based on the life of equipment or on 
the life of the reserves which the transportation system services or on 
a unit-of-production method. After an election is made, the lessee may 
not change methods without MMS approval. A change in ownership of a 
transportation system shall not alter the depreciation schedule 
established by the original transporter/lessee for purposes of the 
allowance calculation. With or without a change in ownership, a 
transportation system shall be depreciated only once. Equipment shall 
not be depreciated below a reasonable salvage value.
    (B) The MMS shall allow as a cost an amount equal to the initial 
capital investment in the transportation system multiplied by the rate 
of return determined pursuant to paragraph (b)(2)(v) of this section. No 
allowance shall be provided for depreciation. This alternative shall 
apply only to transportation facilities first placed in service after 
March 1, 1988.
    (v) The rate of return must be the industrial rate associated with 
Standard and Poor's BBB rating. The rate of return must be the monthly 
average rate as published in Standard and Poor's Bond Guide for the 
first month for which the allowance is applicable. The rate must be 
redetermined at the beginning of each subsequent calendar year.
    (3)(i) The deduction for transportation costs shall be determined on 
the basis of the lessee's cost of transporting each product through each 
individual transportation system. Where more than one liquid product is 
transported, allocation of costs to each of the liquid products 
transported shall be in the same proportion as the ratio of the volume 
of each liquid product (excluding waste products which have no value) to 
the volume of all liquid products (excluding waste products which have 
no value) and such allocation shall be

[[Page 44]]

made in a consistent and equitable manner. Except as provided in this 
paragraph, the lessee may not take an allowance for transporting lease 
production which is not royalty-bearing without MMS approval.
     (ii) Notwithstanding the requirements of paragraph (i), the lessee 
may propose to the MMS a cost allocation method on the basis of the 
values of the products transported. The MMS shall approve the method 
unless it determines that it is not consistent with the purposes of the 
regulations in this part.
    (4) Where both gaseous and liquid products are transported through 
the same transportation system, the lessee shall propose a cost 
allocation procedure to MMS. The lessee may use the oil transportation 
allowance determined in accordance with its proposed allocation 
procedure until MMS issues its determination on the acceptability of the 
cost allocation. The lessee shall submit all available data to support 
its proposal. MMS shall then determine the oil transportation allowance 
on the basis of the lessee's proposal and any additional information MMS 
deems necessary. The lessee must submit the allocation proposal within 3 
months of claiming the allocated deduction on the Form MMS-2014.
    (5) A lessee may apply to the MMS for an exception from the 
requirement that it compute actual costs in accordance with paragraphs 
(b)(1) through (b)(4) of this section. The MMS will grant the exception 
only if the lessee has a tariff for the transportation system approved 
by the Federal Energy Regulatory Commission (FERC) (for both Federal and 
Indian leases) or a State regulatory agency (for Federal leases). The 
MMS shall deny the exception request if it determines that the tariff is 
excessive as compared to arm's-length transportation charges by 
pipelines, owned by the lessee or others, providing similar 
transportation services in that area. If there are no arm's-length 
transportation charges, MMS shall deny the exception request if: (i) No 
FERC or State regulatory agency cost analysis exists and the FERC or 
State regulatory agency, as applicable, has declined to investigate 
pursuant to MMS timely objections upon filing; and (ii) the tariff 
significantly exceeds the lessee's actual costs for transportation as 
determined under this section.
    (c) Reporting requirements. (1) Arm's-length contracts. (i) The 
lessee must notify MMS of an allowance based on incurred costs by using 
a separate line entry on the Form MMS-2014.
    (ii) The MMS may require that a lessee submit arm's-length 
transportation contracts, production agreements, operating agreements, 
and related documents. Documents shall be submitted within a reasonable 
time, as determined by MMS.
    (2) Non-arm's-length or no contract. (i) The lessee must notify MMS 
of an allowance based on the incurred costs by using a separate line 
entry on the Form MMS-2014.
    (ii) For new transportation facilities or arrangements, the lessee's 
initial deduction shall include estimates of the allowable oil 
transportation costs for the applicable period. Cost estimates shall be 
based upon the most recently available operations data for the 
transportation system or, if such data are not available, the lessee 
shall use estimates based upon industry data for similar transportation 
systems.
    (iii) Upon request by MMS, the lessee shall submit all data used to 
prepare the allowance deduction. The data shall be provided within a 
reasonable period of time, as determined by MMS.
    (iv) If the lessee is authorized to use its FERC-approved or State 
regulatory agency-approved tariff as its transportation cost in 
accordance with paragraph (b)(5) of this section, it shall follow the 
reporting requirements of paragraph (c)(1) of this section.
    (d) Interest and assessments. (1) If a lessee nets a transportation 
allowance against the royalty value on the Form MMS-2014, the lessee 
shall be assessed an amount of up to 10 percent of the allowance netted 
not to exceed $250 per lease selling arrangement per sales period.
    (2) If a lessee deducts a transportation allowance on its Form MMS-
2014 that exceeds 50 percent of the value of the oil transported without 
obtaining prior approval of MMS under 206.104 of this subpart, the 
lessee shall pay interest on the excess allowance

[[Page 45]]

amount taken from the date such amount is taken to the date the lessee 
files an exception request with MMS.
    (3) If a lessee erroneously reports a transportation allowance which 
results in an underpayment of royalties, interest shall be paid on the 
amount of that underpayment.
    (4) Interest required to be paid by this section shall be determined 
in accordance with 30 CFR 218.54.
    (e) Adjustments. (1) If the actual transportation allowance is less 
than the amount the lessee has taken on Form MMS-2014 for each month 
during the allowance reporting period, the lessee shall pay additional 
royalties due plus interest computed under 30 CFR 218.54 from the 
allowance reporting period when the lessee took the deduction to the 
date the lessee repays the difference to MMS. If the actual 
transportation allowance is greater than the amount the lessee has taken 
on Form MMS-2014 for each month during the allowance reporting period, 
the lessee shall be entitled to a credit without interest.
    (2) For lessees transporting production from onshore Federal leases, 
the lessee must submit a corrected Form MMS-2014 to reflect actual 
costs, together with any payment, in accordance with instructions 
provided by MMS.
    (f) Actual or theoretical losses. Notwithstanding any other 
provisions of this subpart, for other than arm's-length contracts, no 
cost shall be allowed for oil transportation which results from payments 
(either volumetric or for value) for actual or theoretical losses. This 
section does not apply when the transportation allowance is based upon a 
FERC or State regulatory agency approved tariff.
    (g) Other transportation cost determinations. The provisions of this 
section shall apply to determine transportation costs when establishing 
value using a netback valuation procedure or any other procedure that 
requires deduction of transportation costs.

[53 FR 1218-1222, Jan. 15, 1988, as amended at 53 FR 45762, Nov. 14, 
1988; 61 FR 5463, Feb. 12, 1996]



Sec. 206.106  Operating allowances.

    Notwithstanding any other provisions in these regulations, an 
operating allowance may be used for the purpose of computing payment 
obligations when specified in the notice of sale and the lease. The 
allowance amount or formula shall be specified in the notice of sale and 
in the lease agreement.

[61 FR 3804, Feb. 2, 1996]



                         Subpart D--Federal Gas

    Source: 53 FR 1272, Jan. 15, 1988, unless otherwise noted.



Sec. 206.150  Purpose and scope.

    (a) This subpart is applicable to all gas production from Federal 
oil and gas leases. The purpose of this subpart is to establish the 
value of production for royalty purposes consistent with the mineral 
leasing laws, other applicable laws and lease terms.
    (b) If the specific provisions of any statute or settlement 
agreement between the United States and a lessee resulting from 
administrative or judicial litigation, or oil and gas lease subject to 
the requirements of this subpart are inconsistent with any regulation in 
this subpart, then the lease, statute, or settlement agreement shall 
govern to the extent of that inconsistency.
    (c) All royalty payments made to MMS are subject to audit and 
adjustment.
    (d) The regulations in this subpart are intended to ensure that the 
administration of oil and gas leases is discharged in accordance with 
the requirements of the governing mineral leasing laws and lease terms.

[61 FR 5464, Feb. 12, 1996]



Sec. 206.151  Definitions.

    For purposes of this subpart:
    Allowance means a deduction in determining value for royalty 
purposes. Processing allowance means an allowance for the reasonable 
costs for processing gas determined under this subpart. Transportation 
allowance means an allowance for the cost of moving royalty bearing 
substances (identifiable, measurable oil and gas, including gas that is 
not in need of initial separation) from the point at which it is first

[[Page 46]]

identifiable and measurable to the sales point or other point where 
value is established under this subpart.
    Area means a geographic region at least as large as the defined 
limits of an oil and/or gas field, in which oil and/or gas lease 
products have similar quality, economic, and legal characteristics.
    Arm's-length contract means a contract or agreement that has been 
arrived at in the marketplace between independent, nonaffiliated persons 
with opposing economic interests regarding that contract. For purposes 
of this subpart, two persons are affiliated if one person controls, is 
controlled by, or is under common control with another person. For 
purposes of this subpart, based on the instruments of ownership of the 
voting securities of an entity, or based on other forms of ownership:
    (a) Ownership in excess of 50 percent constitutes control;
    (b) Ownership of 10 through 50 percent creates a presumption of 
control; and
    (c) Ownership of less than 10 percent creates a presumption of 
noncontrol which MMS may rebut if it demonstrates actual or legal 
control, including the existence of interlocking directorates.

Notwithstanding any other provisions of this subpart, contracts between 
relatives, either by blood or by marriage, are not arm's-length 
contracts. The MMS may require the lessee to certify ownership control. 
To be considered arm's-length for any production month, a contract must 
meet the requirements of this definition for that production month as 
well as when the contract was executed.
    Audit means a review, conducted in accordance with generally 
accepted accounting and auditing standards, of royalty payment 
compliance activities of lessees or other interest holders who pay 
royalties, rents, or bonuses on Federal leases.
    BLM means the Bureau of Land Management of the Department of the 
Interior.
    Compression means the process of raising the pressure of gas.
    Condensate means liquid hydrocarbons (normally exceeding 40 degrees 
of API gravity) recovered at the surface without resorting to 
processing. Condensate is the mixture of liquid hydrocarbons that 
results from condensation of petroleum hydrocarbons existing initially 
in a gaseous phase in an underground reservoir.
    Contract means any oral or written agreement, including amendments 
or revisions thereto, between two or more persons and enforceable by law 
that with due consideration creates an obligation.
    Field means a geographic region situated over one or more subsurface 
oil and gas reservoirs encompassing at least the outermost boundaries of 
all oil and gas accumulations known to be within those reservoirs 
vertically projected to the land surface. Onshore fields are usually 
given names and their official boundaries are often designated by oil 
and gas regulatory agencies in the respective States in which the fields 
are located. Outer Continental Shelf (OCS) fields are named and their 
boundaries are designated by MMS.
    Gas means any fluid, either combustible or noncombustible, 
hydrocarbon or nonhydrocarbon, which is extracted from a reservoir and 
which has neither independent shape nor volume, but tends to expand 
indefinitely. It is a substance that exists in a gaseous or rarefied 
state under standard temperature and pressure conditions.
    Gas plant products means separate marketable elements, compounds, or 
mixtures, whether in liquid, gaseous, or solid form, resulting from 
processing gas, excluding residue gas.
    Gathering means the movement of lease production to a central 
accumulation and/or treatment point on the lease, unit or communitized 
area, or to a central accumulation or treatment point off the lease, 
unit or communitized area as approved by BLM or MMS OCS operations 
personnel for onshore and OCS leases, respectively.
    Gross proceeds (for royalty payment purposes) means the total monies 
and other consideration accruing to an oil and gas lessee for the 
disposition of the oil produced. Gross proceeds includes, but is not 
limited to, payments to the

[[Page 47]]

lessee for certain services such as dehydration, measurement, and/or 
gathering to the extent that the lessee is obligated to perform them at 
no cost to the Federal Government. Gross proceeds, as applied to oil, 
also includes, but is not limited to, reimbursements for harboring or 
terminaling fees. Tax reimbursements are part of the gross proceeds 
accruing to a lessee even though the Federal royalty interest may be 
exempt from taxation. Monies and other consideration, including the 
forms of consideration identified in this paragraph, to which a lessee 
is contractually or legally entitled but which it does not seek to 
collect through reasonable efforts are also part of gross proceeds.
    Lease means any contract, profit-share arrangement, joint venture, 
or other agreement issued or approved by the United States under a 
mineral leasing law that authorizes exploration for, development or 
extraction of, or removal of lease products--or the land area covered by 
that authorization, whichever is required by the context.
    Lease products means any leased minerals attributable to, 
originating from, or allocated to Outer Continental Shelf or onshore 
Federal leases.
    Lessee means any person to whom the United States issues a lease, 
and any person who has been assigned an obligation to make royalty or 
other payments required by the lease. This includes any person who has 
an interest in a lease as well as an operator or payor who has no 
interest in the lease but who has assumed the royalty payment 
responsibility.
    Like-quality lease products means lease products which have similar 
chemical, physical, and legal characteristics.
    Marketable condition means lease products which are sufficiently 
free from impurities and otherwise in a condition that they will be 
accepted by a purchaser under a sales contract typical for the field or 
area.
    Marketing affiliate means an affiliate of the lessee whose function 
is to acquire only the lessee's production and to market that 
production.
    Minimum royalty means that minimum amount of annual royalty that the 
lessee must pay as specified in the lease or in applicable leasing 
regulations.
    Net-back method (or work-back method) means a method for calculating 
market value of gas at the lease. Under this method, costs of 
transportation, processing, or manufacturing are deducted from the 
proceeds received for the gas, residue gas or gas plant products, and 
any extracted, processed, or manufactured products, or from the value of 
the gas, residue gas or gas plant products, and any extracted, 
processed, or manufactured products, at the first point at which 
reasonable values for any such products may be determined by a sale 
pursuant to an arm's-length contract or comparison to other sales of 
such products, to ascertain value at the lease.
    Net output means the quantity of residue gas and each gas plant 
product that a processing plant produces.
    Net profit share (for applicable Federal leases) means the specified 
share of the net profit from production of oil and gas as provided in 
the agreement.
    Netting is the deduction of an allowance from the sales value by 
reporting a one line net sales value, instead of correctly reporting the 
deduction as a separate line item on the Form MMS-2014.
    Outer Continental Shelf (OCS) means all submerged lands lying 
seaward and outside of the area of land beneath navigable waters as 
defined in section 2 of the Submerged Lands Act (43 U.S.C. 1301) and of 
which the subsoil and seabed appertain to the United States and are 
subject to its jurisdiction and control.
    Person means any individual, firm, corporation, association, 
partnership, consortium, or joint venture (when established as a 
separate entity).
    Posted price means the price, net of all adjustments for quality and 
location, specified in publicly available price bulletins or other price 
notices available as part of normal business operations for quantities 
of unprocessed gas, residue gas, or gas plant products in marketable 
condition.
    Processing means any process designed to remove elements or 
compounds (hydrocarbon and nonhydrocarbon) from gas, including 
absorption,

[[Page 48]]

adsorption, or refrigeration. Field processes which normally take place 
on or near the lease, such as natural pressure reduction, mechanical 
separation, heating, cooling, dehydration, and compression, are not 
considered processing. The changing of pressures and/or temperatures in 
a reservoir is not considered processing.
    Residue gas means that hydrocarbon gas consisting principally of 
methane resulting from processing gas.
    Section 6 lease means an OCS lease subject to section 6 of the Outer 
Continental Shelf Lands Act, as amended, 43 U.S.C. 1335.
    Selling arrangement means the individual contractual arrangements 
under which sales or dispositions of gas, residue gas and gas plant 
products are made. Selling arrangements are described by illustration in 
the MMS Royalty Management Program Oil and Gas Payor Handbook.
    Spot sales agreement means a contract wherein a seller agrees to 
sell to a buyer a specified amount of unprocessed gas, residue gas, or 
gas plant products at a specified price over a fixed period, usually of 
short duration, which does not normally require a cancellation notice to 
terminate, and which does not contain an obligation, nor imply an 
intent, to continue in subsequent periods.
    Warranty contract means a long-term contract entered into prior to 
1970, including any amendments thereto, for the sale of gas wherein the 
producer agrees to sell a specific amount of gas and the gas delivered 
in satisfaction of this obligation may come from fields or sources 
outside of the designated fields.

[53 FR 1272, Jan. 15, 1988, as amended at 53 FR 45084, Nov. 8, 1988; 61 
FR 5464, Feb. 12, 1996]



Sec. 206.152  Valuation standards--unprocessed gas.

    (a)(1) This section applies to the valuation of all gas that is not 
processed and all gas that is processed but is sold or otherwise 
disposed of by the lessee pursuant to an arm's-length contract prior to 
processing (including all gas where the lessee's arm's-length contract 
for the sale of that gas prior to processing provides for the value to 
be determined on the basis of a percentage of the purchaser's proceeds 
resulting from processing the gas). This section also applies to 
processed gas that must be valued prior to processing in accordance with 
Sec. 206.155 of this part. Where the lessee's contract includes a 
reservation of the right to process the gas and the lessee exercises 
that right, Sec. 206.153 of this part shall apply instead of this 
section.
    (2) The value of production, for royalty purposes, of gas subject to 
this subpart shall be the value of gas determined under this section 
less applicable allowances.
    (b)(1)(i) The value of gas which is sold pursuant to an arm's-length 
contract shall be the gross proceeds accruing to the lessee, except as 
provided in paragraphs (b)(1) (ii) and (iii) of this section. The lessee 
shall have the burden of demonstrating that its contract is arm's-
length. The value which the lessee reports, for royalty purposes, is 
subject to monitoring, review, and audit. For purposes of this section, 
gas which is sold or otherwise transferred to the lessee's marketing 
affiliate and then sold by the marketing affiliate pursuant to an arm's-
length contract shall be valued in accordance with this paragraph based 
upon the sale by the marketing affiliate. Also, where the lessee's 
arm's-length contract for the sale of gas prior to processing provides 
for the value to be determined based upon a percentage of the 
purchaser's proceeds resulting from processing the gas, the value of 
production, for royalty purposes, shall never be less than a value 
equivalent to 100 percent of the value of the residue gas attributable 
to the processing of the lessee's gas.
    (ii) In conducting reviews and audits, MMS will examine whether the 
contract reflects the total consideration actually transferred either 
directly or indirectly from the buyer to the seller for the gas. If the 
contract does not reflect the total consideration, then the MMS may 
require that the gas sold pursuant to that contract be valued in 
accordance with paragraph (c) of this section. Value may not be less 
than the gross proceeds accruing to the lessee, including the additional 
consideration.
    (iii) If the MMS determines that the gross proceeds accruing to the 
lessee

[[Page 49]]

pursuant to an arm's-length contract do not reflect the reasonable value 
of the production because of misconduct by or between the contracting 
parties, or because the lessee otherwise has breached its duty to the 
lessor to market the production for the mutual benefit of the lessee and 
the lessor, then MMS shall require that the gas production be valued 
pursuant to paragraph (c)(2) or (c)(3) of this section, and in 
accordance with the notification requirements of paragraph (e) of this 
section. When MMS determines that the value may be unreasonable, MMS 
will notify the lessee and give the lessee an opportunity to provide 
written information justifying the lessee's value.
    (2) Notwithstanding the provisions of paragraph (b)(1) of this 
section, the value of gas sold pursuant to a warranty contract shall be 
determined by MMS, and due consideration will be given to all valuation 
criteria specified in this section. The lessee must request a value 
determination in accordance with paragraph (g) of this section for gas 
sold pursuant to a warranty contract; provided, however, that any value 
determination for a warranty contract in effect on the effective date of 
these regulations shall remain in effect until modified by MMS.
    (3) MMS may require a lessee to certify that its arm's-length 
contract provisions include all of the consideration to be paid by the 
buyer, either directly or indirectly, for the gas.
    (c) The value of gas subject to this section which is not sold 
pursuant to an arm's-length contract shall be the reasonable value 
determined in accordance with the first applicable of the following 
methods:
    (1) The gross proceeds accruing to the lessee pursuant to a sale 
under its non-arm's-length contract (or other disposition other than by 
an arm's-length contract), provided that those gross proceeds are 
equivalent to the gross proceeds derived from, or paid under, comparable 
arm's-length contracts for purchases, sales, or other dispositions of 
like-quality gas in the same field (or, if necessary to obtain a 
reasonable sample, from the same area). In evaluating the comparability 
of arm's-length contracts for the purposes of these regulations, the 
following factors shall be considered: price, time of execution, 
duration, market or markets served, terms, quality of gas, volume, and 
such other factors as may be appropriate to reflect the value of the 
gas;
    (2) A value determined by consideration of other information 
relevant in valuing like-quality gas, including gross proceeds under 
arm's-length contracts for like-quality gas in the same field or nearby 
fields or areas, posted prices for gas, prices received in arm's-length 
spot sales of gas, other reliable public sources of price or market 
information, and other information as to the particular lease operation 
or the saleability of the gas; or
    (3) A net-back method or any other reasonable method to determine 
value.
    (d)(1) Notwithstanding any other provisions of this section, except 
paragraph (h) of this section, if the maximum price permitted by Federal 
law at which gas may be sold is less than the value determined pursuant 
to this section, then MMS shall accept such maximum price as the value. 
For purposes of this section, price limitations set by any State or 
local government shall not be considered as a maximum price permitted by 
Federal law.
    (2) The limitation prescribed in paragraph (d)(1) of this section 
shall not apply to gas sold pursuant to a warranty contract and valued 
pursuant to paragraph (b)(2) of this section.
    (e)(1) Where the value is determined pursuant to paragraph (c) of 
this section, the lessee shall retain all data relevant to the 
determination of royalty value. Such data shall be subject to review and 
audit, and MMS will direct a lessee to use a different value if it 
determines that the reported value is inconsistent with the requirements 
of these regulations.
    (2) Any Federal lessee will make available upon request to the 
authorized MMS or State representatives, to the Office of the Inspector 
General of the Department of the Interior, or other person authorized to 
receive such information, arm's-length sales and volume data for like-
quality production sold, purchased or otherwise obtained by the lessee 
from the field or area or from nearby fields or areas.

[[Page 50]]

    (3) A lessee shall notify MMS if it has determined value pursuant to 
paragraph (c)(2) or (c)(3) of this section. The notification shall be by 
letter to the MMS Associate Director for Royalty Management or his/her 
designee. The letter shall identify the valuation method to be used and 
contain a brief description of the procedure to be followed. The 
notification required by this paragraph is a one-time notification due 
no later than the end of the month following the month the lessee first 
reports royalties on a Form MMS-2014 using a valuation method authorized 
by paragraph (c)(2) or (c)(3) of this section, and each time there is a 
change in a method under paragraph (c)(2) or (c)(3) of this section.
    (f) If MMS determines that a lessee has not properly determined 
value, the lessee shall pay the difference, if any, between royalty 
payments made based upon the value it has used and the royalty payments 
that are due based upon the value established by MMS. The lessee shall 
also pay interest on that difference computed pursuant to 30 CFR 218.54. 
If the lessee is entitled to a credit, MMS will provide instructions for 
the taking of that credit.
    (g) The lessee may request a value determination from MMS. In that 
event, the lessee shall propose to MMS a value determination method, and 
may use that method in determining value for royalty purposes until MMS 
issues its decision. The lessee shall submit all available data relevant 
to its proposal. The MMS shall expeditiously determine the value based 
upon the lessee's proposal and any additional information MMS deems 
necessary. In making a value determination MMS may use any of the 
valuation criteria authorized by this subpart. That determination shall 
remain effective for the period stated therein. After MMS issues its 
determination, the lessee shall make the adjustments in accordance with 
paragraph (f) of this section.
    (h) Notwithstanding any other provision of this section, under no 
circumstances shall the value of production for royalty purposes be less 
than the gross proceeds accruing to the lessee for lease production, 
less applicable allowances.
    (i) The lessee is required to place gas in marketable condition at 
no cost to the Federal Government unless otherwise provided in the lease 
agreement. Where the value established under this section is determined 
by a lessee's gross proceeds, that value shall be increased to the 
extent that the gross proceeds have been reduced because the purchaser, 
or any other person, is providing certain services the cost of which 
ordinarily is the responsibility of the lessee to place the gas in 
marketable condition.
    (j) Value shall be based on the highest price a prudent lessee can 
receive through legally enforceable claims under its contract. If there 
is no contract revision or amendment, and the lessee fails to take 
proper or timely action to receive prices or benefits to which it is 
entitled, it must pay royalty at a value based upon that obtainable 
price or benefit. Contract revisions or amendments shall be in writing 
and signed by all parties to an arm's-length contract. If the lessee 
makes timely application for a price increase or benefit allowed under 
its contract but the purchaser refuses, and the lessee takes reasonable 
measures, which are documented, to force purchaser compliance, the 
lessee will owe no additional royalties unless or until monies or 
consideration resulting from the price increase or additional benefits 
are received. This paragraph shall not be construed to permit a lessee 
to avoid its royalty payment obligation in situations where a purchaser 
fails to pay, in whole or in part or timely, for a quantity of gas.
    (k) Notwithstanding any provision in these regulations to the 
contrary, no review, reconciliation, monitoring, or other like process 
that results in a redetermination by MMS of value under this section 
shall be considered final or binding as against the Federal Government 
or its beneficiaries until the audit period is formally closed.
    (l) Certain information submitted to MMS to support valuation 
proposals, including transportation or extraordinary cost allowances, is 
exempted from disclosure by the Freedom of Information Act, 5 U.S.C. 
Sec. 552, or other Federal law. Any data specified by law

[[Page 51]]

to be privileged, confidential, or otherwise exempt will be maintained 
in a confidential manner in accordance with applicable law and 
regulations. All requests for information about determinations made 
under this subpart are to be submitted in accordance with the Freedom of 
Information Act regulation of the Department of the Interior, 43 CFR 
part 2.

[53 FR 1272, Jan. 15, 1988, as amended at 56 FR 46530, Sept. 13, 1991; 
61 FR 5464, Feb. 12, 1996]



Sec. 206.153  Valuation standards--processed gas.

    (a)(1) This section applies to the valuation of all gas that is 
processed by the lessee and any other gas production to which this 
subpart applies and that is not subject to the valuation provisions of 
Sec. 206.152 of this part. This section applies where the lessee's 
contract includes a reservation of the right to process the gas and the 
lessee exercises that right.
    (2) The value of production, for royalty purposes, of gas subject to 
this section shall be the combined value of the residue gas and all gas 
plant products determined pursuant to this section, plus the value of 
any condensate recovered downstream of the point of royalty settlement 
without resorting to processing determined pursuant to Sec. 206.102 of 
this part, less applicable transportation allowances and processing 
allowances determined pursuant to this subpart.
    (b)(1)(i) The value of the residue gas or any gas plant product 
which is sold pursuant to an arm's-length contract shall be the gross 
proceeds accruing to the lessee, except as provided in paragraphs (b)(1) 
(ii) and (iii) of this section. The lessee shall have the burden of 
demonstrating that its contract is arm's-length. The value that the 
lessee reports for royalty purposes is subject to monitoring, review, 
and audit. For purposes of this section, residue gas or any gas plant 
product which is sold or otherwise transferred to the lessee's marketing 
affiliate and then sold by the marketing affiliate pursuant to an arm's-
length contract shall be valued in accordance with this paragraph based 
upon the sale by the marketing affiliate.
    (ii) In conducting these reviews and audits, MMS will examine 
whether or not the contract reflects the total consideration actually 
transferred either directly or indirectly from the buyer to the seller 
for the residue gas or gas plant product. If the contract does not 
reflect the total consideration, then the MMS may require that the 
residue gas or gas plant product sold pursuant to that contract be 
valued in accordance with paragraph (c) of this section. Value may not 
be less than the gross proceeds accruing to the lessee, including the 
additional consideration.
    (iii) If the MMS determines that the gross proceeds accruing to the 
lessee pursuant to an arm's-length contract do not reflect the 
reasonable value of the residue gas or gas plant product because of 
misconduct by or between the contracting parties, or because the lessee 
otherwise has breached its duty to the lessor to market the production 
for the mutual benefit of the lessee and the lessor, then MMS shall 
require that the residue gas or gas plant product be valued pursuant to 
paragraph (c)(2) or (c)(3) of this section, and in accordance with the 
notification requirements of paragraph (e) of this section. When MMS 
determines that the value may be unreasonable, MMS will notify the 
lessee and give the lessee an opportunity to provide written information 
justifying the lessee's value.
    (2) Notwithstanding the provisions of paragraph (b)(1) of this 
section, the value of residue gas sold pursuant to a warranty contract 
shall be determined by MMS, and due consideration will be given to all 
valuation criteria specified in this section. The lessee must request a 
value determination in accordance with paragraph (g) of this section for 
gas sold pursuant to a warranty contract; provided, however, that any 
value determination for a warranty contract in effect on the effective 
date of these regulations shall remain in effect until modified by MMS.
    (3) MMS may require a lessee to certify that its arm's-length 
contract provisions include all of the consideration to be paid by the 
buyer, either directly or indirectly, for the residue gas or gas plant 
product.
    (c) The value of residue gas or any gas plant product which is not 
sold

[[Page 52]]

pursuant to an arm's-length contract shall be the reasonable value 
determined in accordance with the first applicable of the following 
methods:
    (1) The gross proceeds accruing to the lessee pursuant to a sale 
under its non-arm's-length contract (or other disposition other than by 
an arm's-length contract), provided that those gross proceeds are 
equivalent to the gross proceeds derived from, or paid under, comparable 
arm's-length contracts for purchases, sales, or other dispositions of 
like quality residue gas or gas plant products from the same processing 
plant (or, if necessary to obtain a reasonable sample, from nearby 
plants). In evaluating the comparability of arm's-length contracts for 
the purposes of these regulations, the following factors shall be 
considered: price, time of execution, duration, market or markets 
served, terms, quality of residue gas or gas plant products, volume, and 
such other factors as may be appropriate to reflect the value of the 
residue gas or gas plant products;
    (2) A value determined by consideration of other information 
relevant in valuing like-quality residue gas or gas plant products, 
including gross proceeds under arm's-length contracts for like-quality 
residue gas or gas plant products from the same gas plant or other 
nearby processing plants, posted prices for residue gas or gas plant 
products, prices received in spot sales of residue gas or gas plant 
products, other reliable public sources of price or market information, 
and other information as to the particular lease operation or the 
saleability of such residue gas or gas plant products; or
    (3) A net-back method or any other reasonable method to determine 
value.
    (d)(1) Notwithstanding any other provisions of this section, except 
paragraph (h) of this section, if the maximum price permitted by Federal 
law at which any residue gas or gas plant products may be sold is less 
than the value determined pursuant to this section, then MMS shall 
accept such maximum price as the value. For the purposes of this 
section, price limitations set by any State or local government shall 
not be considered as a maximum price permitted by Federal law.
    (2) The limitation prescribed by paragraph (d)(1) of this section 
shall not apply to residue gas sold pursuant to a warranty contract and 
valued pursuant to paragraph (b)(2) of this section.
    (e)(1) Where the value is determined pursuant to paragraph (c) of 
this section, the lessee shall retain all data relevant to the 
determination of royalty value. Such data shall be subject to review and 
audit, and MMS will direct a lessee to use a different value if it 
determines upon review or audit that the reported value is inconsistent 
with the requirements of these regulations.
    (2) Any Federal lessee will make available upon request to the 
authorized MMS or State representatives, to the Office of the Inspector 
General of the Department of the Interior, or other persons authorized 
to receive such information, arm's-length sales and volume data for 
like-quality residue gas and gas plant products sold, purchased or 
otherwise obtained by the lessee from the same processing plant or from 
nearby processing plants.
    (3) A lessee shall notify MMS if it has determined any value 
pursuant to paragraph (c)(2) or (c)(3) of this section. The notification 
shall be by letter to the MMS Associate Director for Royalty Management 
or his/her designee. The letter shall identify the valuation method to 
be used and contain a brief description of the procedure to be followed. 
The notification required by this paragraph is a one-time notification 
due no later than the end of the month following the month the lessee 
first reports royalties on a Form MMS-2014 using a valuation method 
authorized by paragraph (c)(2) or (c)(3) of this section, and each time 
there is a change in a method under paragraph (c)(2) or (c)(3) of this 
section.
    (f) If MMS determines that a lessee has not properly determined 
value, the lessee shall pay the difference, if any, between royalty 
payments made based upon the value it has used and the royalty payments 
that are due based upon the value established by MMS. The lessee shall 
also pay interest computed on that difference pursuant to 30 CFR 218.54. 
If the lessee is entitled to a credit, MMS will provide instructions for 
the taking of that credit.

[[Page 53]]

    (g) The lessee may request a value determination from MMS. In that 
event, the lessee shall propose to MMS a value determination method, and 
may use that method in determining value for royalty purposes until MMS 
issues its decision. The lessee shall submit all available data relevant 
to its proposal. The MMS shall expeditiously determine the value based 
upon the lessee's proposal and any additional information MMS deems 
necessary. In making a value determination, MMS may use any of the 
valuation criteria authorized by this subpart. That determination shall 
remain effective for the period stated therein. After MMS issues its 
determination, the lessee shall make the adjustments in accordance with 
paragraph (f) of this section.
    (h) Notwithstanding any other provision of this section, under no 
circumstances shall the value of production for royalty purposes be less 
than the gross proceeds accruing to the lessee for residue gas and/or 
any gas plant products, less applicable transportation allowances and 
processing allowances determined pursuant to this subpart.
    (i) The lessee is required to place residue gas and gas plant 
products in marketable condition at no cost to the Federal Government 
unless otherwise provided in the lease agreement. Where the value 
established under this section is determined by a lessee's gross 
proceeds, that value shall be increased to the extent that the gross 
proceeds have been reduced because the purchaser, or any other person, 
is providing certain services the cost of which ordinarily is the 
responsibility of the lessee to place the residue gas or gas plant 
products in marketable condition.
    (j) Value shall be based on the highest price a prudent lessee can 
receive through legally enforceable claims under its contract. Absent 
contract revision or amendment, if the lessee fails to take proper or 
timely action to receive prices or benefits to which it is entitled it 
must pay royalty at a value based upon that obtainable price or benefit. 
Contract revisions or amendments shall be in writing and signed by all 
parties to an arm's-length contract. If the lessee makes timely 
application for a price increase or benefit allowed under its contract 
but the purchaser refuses, and the lessee takes reasonable measures, 
which are documented, to force purchaser compliance, the lessee will owe 
no additional royalties unless or until monies or consideration 
resulting from the price increase or additional benefits are received. 
This paragraph shall not be construed to permit a lessee to avoid its 
royalty payment obligation in situations where a purchaser fails to pay, 
in whole or in part, or timely, for a quantity of residue gas or gas 
plant product.
    (k) Notwithstanding any provision in these regulations to the 
contrary, no review, reconciliation, monitoring, or other like process 
that results in a redetermination by MMS of value under this section 
shall be considered final or binding against the Federal Government or 
its beneficiaries until the audit period is formally closed.
    (l) Certain information submitted to MMS to support valuation 
proposals, including transportation allowances, processing allowances or 
extraordinary cost allowances, is exempted from disclosure by the 
Freedom of Information Act, 5 U.S.C. 552, or other Federal law. Any data 
specified by law to be privileged, confidential, or otherwise exempt, 
will be maintained in a confidential manner in accordance with 
applicable law and regulations. All requests for information about 
determinations made under this part are to be submitted in accordance 
with the Freedom of Information Act regulation of the Department of the 
Interior, 43 CFR part 2.

[53 FR 1272, Jan. 15, 1988, as amended at 56 FR 46530, Sept. 13, 1991; 
61 FR 5465, Feb. 12, 1996]



Sec. 206.154  Determination of quantities and qualities for computing royalties.

    (a)(1) Royalties shall be computed on the basis of the quantity and 
quality of unprocessed gas at the point of royalty settlement approved 
by BLM or MMS for onshore and OCS leases, respectively.
    (2) If the value of gas determined pursuant to Sec. 206.152 of this 
subpart is based upon a quantity and/or quality that is different from 
the quantity and/

[[Page 54]]

or quality at the point of royalty settlement, as approved by BLM or 
MMS, that value shall be adjusted for the differences in quantity and/or 
quality.
    (b)(1) For residue gas and gas plant products, the quantity basis 
for computing royalties due is the monthly net output of the plant even 
though residue gas and/or gas plant products may be in temporary 
storage.
    (2) If the value of residue gas and/or gas plant products determined 
pursuant to Sec. 206.153 of this subpart is based upon a quantity and/or 
quality of residue gas and/or gas plant products that is different from 
that which is attributable to a lease, determined in accordance with 
paragraph (c) of this section, that value shall be adjusted for the 
differences in quantity and/or quality.
    (c) The quantity of the residue gas and gas plant products 
attributable to a lease shall be determined according to the following 
procedure:
    (1) When the net output of the processing plant is derived from gas 
obtained from only one lease, the quantity of the residue gas and gas 
plant products on which computations of royalty are based is the net 
output of the plant.
    (2) When the net output of a processing plant is derived from gas 
obtained from more than one lease producing gas of uniform content, the 
quantity of the residue gas and gas plant products allocable to each 
lease shall be in the same proportions as the ratios obtained by 
dividing the amount of gas delivered to the plant from each lease by the 
total amount of gas delivered from all leases.
    (3) When the net output of a processing plant is derived from gas 
obtained from more than one lease producing gas of nonuniform content, 
the quantity of the residue gas allocable to each lease will be 
determined by multiplying the amount of gas delivered to the plant from 
the lease by the residue gas content of the gas, and dividing the 
arithmetical product thus obtained by the sum of the similar 
arithmetical products separately obtained for all leases from which gas 
is delivered to the plant, and then multiplying the net output of the 
residue gas by the arithmetic quotient obtained. The net output of gas 
plant products allocable to each lease will be determined by multiplying 
the amount of gas delivered to the plant from the lease by the gas plant 
product content of the gas, and dividing the arithmetical product thus 
obtained by the sum of the similar arithmetical products separately 
obtained for all leases from which gas is delivered to the plant, and 
then multiplying the net output of each gas plant product by the 
arithmetic quotient obtained.
    (4) A lessee may request MMS approval of other methods for 
determining the quantity of residue gas and gas plant products allocable 
to each lease. If approved, such method will be applicable to all gas 
production from Federal leases that is processed in the same plant.
    (d)(1) No deductions may be made from the royalty volume or royalty 
value for actual or theoretical losses. Any actual loss of unprocessed 
gas that may be sustained prior to the royalty settlement metering or 
measurement point will not be subject to royalty provided that such loss 
is determined to have been unavoidable by BLM or MMS, as appropriate.
    (2) Except as provided in paragraph (d)(1) of this section and 30 
CFR 202.151(c), royalties are due on 100 percent of the volume 
determined in accordance with paragraphs (a) through (c) of this 
section. There can be no reduction in that determined volume for actual 
losses after the quantity basis has been determined or for theoretical 
losses that are claimed to have taken place. Royalties are due on 100 
percent of the value of the unprocessed gas, residue gas, and/or gas 
plant products as provided in this subpart, less applicable allowances. 
There can be no deduction from the value of the unprocessed gas, residue 
gas, and/or gas plant products to compensate for actual losses after the 
quantity basis has been determined, or for theoretical losses that are 
claimed to have taken place.

[53 FR 1272, Jan. 15, 1988, as amended at 61 FR 5465, Feb. 12, 1996]



Sec. 206.155  Accounting for comparison.

    (a) Except as provided in paragraph (b) of this section, where the 
lessee (or a person to whom the lessee has transferred gas pursuant to a 
non-arm's-

[[Page 55]]

length contract or without a contract) processes the lessee's gas and 
after processing the gas the residue gas is not sold pursuant to an 
arm's-length contract, the value, for royalty purposes, shall be the 
greater of (1) the combined value, for royalty purposes, of the residue 
gas and gas plant products resulting from processing the gas determined 
pursuant to Sec. 206.153 of this subpart, plus the value, for royalty 
purposes, of any condensate recovered downstream of the point of royalty 
settlement without resorting to processing determined pursuant to 
Sec. 206.102 of this subpart; or (2) the value, for royalty purposes, of 
the gas prior to processing determined in accordance with Sec. 206.152 
of this subpart.
    (b) The requirement for accounting for comparison contained in the 
terms of leases will govern as provided in Sec. 206.150(b) of this 
subpart. When accounting for comparison is required by the lease terms, 
such accounting for comparison shall be determined in accordance with 
paragraph (a) of this section.

[53 FR 1272, Jan. 15, 1988, as amended at 61 FR 5465, Feb. 12, 1996]



Sec. 206.156  Transportation allowances--general.

    (a) Where the value of gas has been determined pursuant to 
Sec. 206.152 or Sec. 206.153 of this subpart at a point (e.g., sales 
point or point of value determination) off the lease, MMS shall allow a 
deduction for the reasonable actual costs incurred by the lessee to 
transport unprocessed gas, residue gas, and gas plant products from a 
lease to a point off the lease including, if appropriate, transportation 
from the lease to a gas processing plant off the lease and from the 
plant to a point away from the plant.
    (b) Transportation costs must be allocated among all products 
produced and transported as provided in Sec. 206.157.
    (c)(1) Except as provided in paragraph (c)(3) of this section, for 
unprocessed gas valued in accordance with Sec. 206.152 of this subpart, 
the transportation allowance deduction on the basis of a selling 
arrangement shall not exceed 50 percent of the value of the unprocessed 
gas determined in accordance with Sec. 206.152 of this subpart.
    (2) Except as provided in paragraph (c)(3) of this section, for gas 
production valued in accordance with Sec. 206.153 of this subpart the 
transportation allowance deduction on the basis of a selling arrangement 
shall not exceed 50 percent of the value of the residue gas or gas plant 
product determined in accordance with Sec. 206.153 of this subpart. For 
purposes of this section, natural gas liquids shall be considered one 
product.
    (3) Upon request of a lessee, MMS may approve a transportation 
allowance deduction in excess of the limitations prescribed by 
paragraphs (c)(1) and (c)(2) of this section. The lessee must 
demonstrate that the transportation costs incurred in excess of the 
limitations prescribed in paragraphs (c)(1) and (c)(2) of this section 
were reasonable, actual, and necessary. An application for exception 
(using Form MMS-4393, Request to Exceed Regulatory Allowance Limitation) 
shall contain all relevant and supporting documentation necessary for 
MMS to make a determination. Under no circumstances shall the value for 
royalty purposes under any selling arrangement be reduced to zero.
    (d) If, after a review and/or audit, MMS determines that a lessee 
has improperly determined a transportation allowance authorized by this 
subpart, then the lessee shall pay any additional royalties, plus 
interest, determined in accordance with 30 CFR 218.54, or shall be 
entitled to a credit, without interest. If the lessee takes a deduction 
for transportation on the Form MMS-2014 by improperly netting the 
allowance against the sales value of the oil instead of reporting the 
allowance as a separate line item, he may be assessed an additional 
amount under 206.157(d).

[53 FR 1272, Jan. 15, 1988, as amended at 61 FR 5465, Feb. 12, 1996]



Sec. 206.157  Determination of transportation allowances.

    (a) Arm's-length transportation contracts. (1)(i) For transportation 
costs incurred by a lessee under an arm's-length contract, the 
transportation allowance shall be the reasonable, actual costs incurred 
by the lessee for transporting the unprocessed gas, residue

[[Page 56]]

gas and/or gas plant products under that contract, except as provided in 
paragraphs (a)(1)(ii) and (a)(1)(iii) of this section, subject to 
monitoring, review, audit, and adjustment. The lessee shall have the 
burden of demonstrating that its contract is arm's-length. MMS' prior 
approval is not required before a lessee may deduct costs incurred under 
an arm's-length contract. Such allowances shall be subject to the 
provisions of paragraph (f) of this section. The lessee must claim a 
transportation allowance by reporting it as a separate line entry on the 
Form MMS-2014.
    (ii) In conducting reviews and audits, MMS will examine whether or 
not the contract reflects more than the consideration actually 
transferred either directly or indirectly from the lessee to the 
transporter for the transportation. If the contract reflects more than 
the total consideration, then the MMS may require that the 
transportation allowance be determined in accordance with paragraph (b) 
of this section.
    (iii) If the MMS determines that the consideration paid pursuant to 
an arm's-length transportation contract does not reflect the reasonable 
value of the transportation because of misconduct by or between the 
contracting parties, or because the lessee otherwise has breached its 
duty to the lessor to market the production for the mutual benefit of 
the lessee and the lessor, then MMS shall require that the 
transportation allowance be determined in accordance with paragraph (b) 
of this section. When MMS determines that the value of the 
transportation may be unreasonable, MMS will notify the lessee and give 
the lessee an opportunity to provide written information justifying the 
lessee's transportation costs.
     (2)(i) If an arm's-length transportation contract includes more 
than one product in a gaseous phase and the transportation costs 
attributable to each product cannot be determined from the contract, the 
total transportation costs shall be allocated in a consistent and 
equitable manner to each of the products transported in the same 
proportion as the ratio of the volume of each product (excluding waste 
products which have no value) to the volume of all products in the 
gaseous phase (excluding waste products which have no value). Except as 
provided in this paragraph, no allowance may be taken for the costs of 
transporting lease production which is not royalty bearing without MMS 
approval.
    (ii) Notwithstanding the requirements of paragraph (i), the lessee 
may propose to MMS a cost allocation method on the basis of the values 
of the products transported. MMS shall approve the method unless it 
determines that it is not consistent with the purposes of the 
regulations in this part.
    (3) If an arm's-length transportation contract includes both gaseous 
and liquid products and the transportation costs attributable to each 
cannot be determined from the contract, the lessee shall propose an 
allocation procedure to MMS. The lessee may use the transportation 
allowance determined in accordance with its proposed allocation 
procedure until MMS issues its determination on the acceptability of the 
cost allocation. The lessee shall submit all relevant data to support 
its proposal. MMS shall then determine the gas transportation allowance 
based upon the lessee's proposal and any additional information MMS 
deems necessary. The lessee must submit the allocation proposal within 3 
months of claiming the allocated deduction on the Form MMS-2014.
    (4) Where the lessee's payments for transportation under an arm's-
length contract are not based on a dollar per unit, the lessee shall 
convert whatever consideration is paid to a dollar value equivalent for 
the purposes of this section.
    (5) Where an arm's-length sales contract price or a posted price 
includes a provision whereby the listed price is reduced by a 
transportation factor, MMS will not consider the transportation factor 
to be a transportation allowance. The transportation factor may be used 
in determining the lessee's gross proceeds for the sale of the product. 
The transportation factor may not exceed 50 percent of the base price of 
the product without MMS approval.
    (b) Non-arm's-length or no contract. (1) If a lessee has a non-
arm's-length transportation contract or has no contract, including those 
situations where the lessee performs transportation

[[Page 57]]

services for itself, the transportation allowance will be based upon the 
lessee's reasonable actual costs as provided in this paragraph. All 
transportation allowances deducted under a non-arm's-length or no 
contract situation are subject to monitoring, review, audit, and 
adjustment. The lessee must claim a transportation allowance by 
reporting it as a separate line entry on the Form MMS-2014. When 
necessary or appropriate, MMS may direct a lessee to modify its 
estimated or actual transportation allowance deduction.
    (2) The transportation allowance for non-arm's-length or no-contract 
situations shall be based upon the lessee's actual costs for 
transportation during the reporting period, including operating and 
maintenance expenses, overhead, and either depreciation and a return on 
undepreciated capital investment in accordance with paragraph 
(b)(2)(iv)(A) of this section, or a cost equal to the initial 
depreciable investment in the transportation system multiplied by a rate 
of return in accordance with paragraph (b)(2)(iv)(B) of this section. 
Allowable capital costs are generally those costs for depreciable fixed 
assets (including costs of delivery and installation of capital 
equipment) which are an integral part of the transportation system.
    (i) Allowable operating expenses include: Operations supervision and 
engineering; operations labor; fuel; utilities; materials; ad valorem 
property taxes; rent; supplies; and any other directly allocable and 
attributable operating expense which the lessee can document.
    (ii) Allowable maintenance expenses include: Maintenance of the 
transportation system; maintenance of equipment; maintenance labor; and 
other directly allocable and attributable maintenance expenses which the 
lessee can document.
    (iii) Overhead directly attributable and allocable to the operation 
and maintenance of the transportation system is an allowable expense. 
State and Federal income taxes and severance taxes and other fees, 
including royalties, are not allowable expenses.
    (iv) A lessee may use either depreciation or a return on depreciable 
capital investment. After a lessee has elected to use either method for 
a transportation system, the lessee may not later elect to change to the 
other alternative without approval of the MMS.
    (A) To compute depreciation, the lessee may elect to use either a 
straight-line depreciation method based on the life of equipment or on 
the life of the reserves which the transportation system services, or a 
unit of production method. After an election is made, the lessee may not 
change methods without MMS approval. A change in ownership of a 
transportation system shall not alter the depreciation schedule 
established by the original transporter/lessee for purposes of the 
allowance calculation. With or without a change in ownership, a 
transportation system shall be depreciated only once. Equipment shall 
not be depreciated below a reasonable salvage value.
    (B) The MMS shall allow as a cost an amount equal to the allowable 
initial capital investment in the transportation system multiplied by 
the rate of return determined pursuant to paragraph (b)(2)(v) of this 
section. No allowance shall be provided for depreciation. This 
alternative shall apply only to transportation facilities first placed 
in service after March 1, 1988.
    (v) The rate of return must be the industrial rate associated with 
Standard and Poor's BBB rating. The rate of return must be the monthly 
average rate as published in Standard and Poor's Bond Guide for the 
first month for which the allowance is applicable. The rate must be 
redetermined at the beginning of each subsequent calendar year.
    (3)(i) The deduction for transportation costs shall be determined on 
the basis of the lessee's cost of transporting each product through each 
individual transportation system. Where more than one product in a 
gaseous phase is transported, the allocation of costs to each of the 
products transported shall be made in a consistent and equitable manner 
in the same proportion as the ratio of the volume of each product 
(excluding waste products which have no value) to the volume of all 
products in the gaseous phase (excluding waste products which have no 
value). Except as provided in this paragraph, the lessee may not take an 
allowance for

[[Page 58]]

transporting a product which is not royalty bearing without MMS 
approval.
    (ii) Notwithstanding the requirements of paragraph (b)(3)(i), the 
lessee may propose to the MMS a cost allocation method on the basis of 
the values of the products transported. MMS shall approve the method 
unless it determines that it is not consistent with the purposes of the 
regulations in this part.
    (4) Where both gaseous and liquid products are transported through 
the same transportation system, the lessee shall propose a cost 
allocation procedure to MMS. The lessee may use the transportation 
allowance determined in accordance with its proposed allocation 
procedure until MMS issues its determination on the acceptability of the 
cost allocation. The lessee shall submit all relevant data to support 
its proposal. MMS shall then determine the transportation allowance 
based upon the lessee's proposal and any additional information MMS 
deems necessary. The lessee must submit the allocation proposal within 3 
months of claiming the allocated deduction on the Form MMS-2014.
    (5) A lessee may apply to the MMS for an exception from the 
requirement that it compute actual costs in accordance with paragraphs 
(b)(1) through (b)(4) of this section. The MMS will grant the exception 
only if the lessee has a tariff for the transportation system approved 
by the Federal Energy Regulatory Commission (FERC) (for both Federal and 
Indian leases) or a State regulatory agency (for Federal leases). The 
MMS shall deny the exception request if it determines that the tariff is 
excessive as compared to arm's-length transportation charges by 
pipelines, owned by the lessee or others, providing similar 
transportation services in that area. If there are no arm's-length 
transportation charges, MMS shall deny the exception request if: (i) No 
FERC or State regulatory agency cost analysis exists and the FERC or 
State regulatory agency, as applicable, has declined to investigate 
pursuant to MMS timely objections upon filing; and (ii) the tariff 
significantly exceeds the lessee's actual costs for transportation as 
determined under this section.
    (c) Reporting requirements. (1) Arm's-length contracts. (i) The 
lessee must notify MMS of an allowance based on incurred costs by using 
a separate line entry on the Form MMS-2014.
    (ii) The MMS may require that a lessee submit arm's-length 
transportation contracts, production agreements, operating agreements, 
and related documents. Documents shall be submitted within a reasonable 
time, as determined by MMS.
    (2) Non-arm's-length or no contract. (i) The lessee must notify MMS 
of an allowance based on the incurred costs by using a separate line 
entry on the Form MMS-2014.
    (ii) For new transportation facilities or arrangements, the lessee's 
initial deduction shall include estimates of the allowable gas 
transportation costs for the applicable period. Cost estimates shall be 
based upon the most recently available operations data for the 
transportation system or, if such data are not available, the lessee 
shall use estimates based upon industry data for similar transportation 
systems.
    (iii) Upon request by MMS, the lessee shall submit all data used to 
prepare the allowance deduction. The data shall be provided within a 
reasonable period of time, as determined by MMS.
    (iv) If the lessee is authorized to use its FERC-approved or State 
regulatory agency-approved tariff as its transportation cost in 
accordance with paragraph (b)(5) of this section, it shall follow the 
reporting requirements of paragraph (c)(1) of this section.
    (d) Interest and assessments. (1) If a lessee nets a transportation 
allowance against the royalty value on the Form MMS-2014, the lessee 
shall be assessed an amount of up to 10 percent of the allowance netted 
not to exceed $250 per lease selling arrangement per sales period.
    (2) If a lessee deducts a transportation allowance on its Form MMS-
2014 that exceeds 50 percent of the value of the gas transported without 
obtaining prior approval of MMS under Sec. 206.156, the lessee shall pay 
interest on the excess allowance amount taken from the date such amount 
is taken to

[[Page 59]]

the date the lessee files an exception request with MMS.
    (3) If a lessee erroneously reports a transportation allowance which 
results in an underpayment of royalties, interest shall be paid on the 
amount of that underpayment.
    (4) Interest required to be paid by this section shall be determined 
in accordance with 30 CFR 218.54.
    (e) Adjustments. (1) If the actual transportation allowance is less 
than the amount the lessee has taken on Form MMS-2014 for each month 
during the allowance reporting period, the lessee shall be required to 
pay additional royalties due plus interest computed under 30 CFR 218.54 
from the allowance reporting period when the lessee took the deduction 
to the date the lessee repays the difference to MMS. If the actual 
transportation allowance is greater than the amount the lessee has taken 
on Form MMS-2014 for each month during the allowance reporting period, 
the lessee shall be entitled to a credit without interest.
    (2) For lessees transporting production from onshore Federal leases, 
the lessee must submit a corrected Form MMS-2014 to reflect actual 
costs, together with any payment, in accordance with instructions 
provided by MMS.
    (3) For lessees transporting gas production from leases on the OCS, 
if the lessee's estimated transportation allowance exceeds the allowance 
based on actual costs, the lessee must submit a corrected Form MMS-2014 
to reflect actual costs, together with its payment, in accordance with 
instructions provided by MMS. If the lessee's estimated transportation 
allowance is less than the allowance based on actual costs, the refund 
procedure will be specified by MMS.
    (f) Actual or theoretical losses. Notwithstanding any other 
provisions of this subpart, for other than arm's-length contracts no 
cost shall be allowed for transportation which results from payments 
(either volumetric or for value) for actual or theoretical losses. This 
section does not apply when the transportation allowance is based upon a 
FERC or state regulatory agency approved tariff.
    (g) Other transportation cost determinations. The provisions of this 
section shall apply to determine transportation costs when establishing 
value using a net-back valuation procedure or any other procedure that 
requires deduction of transportation costs.

[53 FR 1272, Jan. 15, 1988, as amended at 53 FR 45762, Nov. 14, 1988; 61 
FR 5465, Feb. 12, 1996]



Sec. 206.158  Processing allowances--general.

    (a) Where the value of gas is determined pursuant to Sec. 206.153 of 
this subpart, a deduction shall be allowed for the reasonable actual 
costs of processing.
    (b) Processing costs must be allocated among the gas plant products. 
A separate processing allowance must be determined for each gas plant 
product and processing plant relationship. Natural gas liquids (NGL's) 
shall be considered as one product.
    (c)(1) Except as provided in paragraph (d)(2) of this section, the 
processing allowance shall not be applied against the value of the 
residue gas. Where there is no residue gas MMS may designate an 
appropriate gas plant product against which no allowance may be applied.
    (2) Except as provided in paragraph (c)(3) of this section, the 
processing allowance deduction on the basis of an individual product 
shall not exceed 66\2/3\ percent of the value of each gas plant product 
determined in accordance with Sec. 206.153 of this subpart (such value 
to be reduced first for any transportation allowances related to 
postprocessing transportation authorized by Sec. 206.156 of this 
subpart).
    (3) Upon request of a lessee, MMS may approve a processing allowance 
in excess of the limitation prescribed by paragraph (c)(2) of this 
section. The lessee must demonstrate that the processing costs incurred 
in excess of the limitation prescribed in paragraph (c)(2) of this 
section were reasonable, actual, and necessary. An application for 
exception (using Form MMS-4393, Request to Exceed Regulatory Allowance 
Limitation) shall contain all relevant and supporting documentation for 
MMS to make a determination. Under no circumstances shall the value

[[Page 60]]

for royalty purposes of any gas plant product be reduced to zero.
    (d)(1) Except as provided in paragraph (d)(2) of this section, no 
processing cost deduction shall be allowed for the costs of placing 
lease products in marketable condition, including dehydration, 
separation, compression, or storage, even if those functions are 
performed off the lease or at a processing plant. Where gas is processed 
for the removal of acid gases, commonly referred to as ``sweetening,'' 
no processing cost deduction shall be allowed for such costs unless the 
acid gases removed are further processed into a gas plant product. In 
such event, the lessee shall be eligible for a processing allowance as 
determined in accordance with this subpart. However, MMS will not grant 
any processing allowance for processing lease production which is not 
royalty bearing.
    (2)(i) If the lessee incurs extraordinary costs for processing gas 
production from a gas production operation, it may apply to MMS for an 
allowance for those costs which shall be in addition to any other 
processing allowance to which the lessee is entitled pursuant to this 
section. Such an allowance may be granted only if the lessee can 
demonstrate that the costs are, by reference to standard industry 
conditions and practice, extraordinary, unusual, or unconventional.
    (ii) Prior MMS approval to continue an extraordinary processing cost 
allowance is not required. However, to retain the authority to deduct 
the allowance the lessee must report the deduction to MMS in a form and 
manner prescribed by MMS.
    (e) If MMS determines that a lessee has improperly determined a 
processing allowance authorized by this subpart, then the lessee shall 
pay any additional royalties, plus interest determined in accordance 
with 30 CFR 218.54, or shall be entitled to a credit, without interest. 
If the lessee takes a deduction for transportation on the Form MMS-2014 
by improperly netting the allowance against the sales value of the oil 
instead of reporting the allowance as a separate line item, he may be 
assessed an additional amount under 206.159(d).

[53 FR 1272, Jan. 15, 1988, as amended at 61 FR 5466, Feb. 12, 1996]



Sec. 206.159  Determination of processing allowances.

    (a) Arm's-length processing contracts. (1)(i) For processing costs 
incurred by a lessee under an arm's-length contract, the processing 
allowance shall be the reasonable actual costs incurred by the lessee 
for processing the gas under that contract, except as provided in 
paragraphs (a)(1)(ii) and (a)(1)(iii) of this section, subject to 
monitoring, review, audit, and adjustment. The lessee shall have the 
burden of demonstrating that its contract is arm's-length. MMS' prior 
approval is not required before a lessee may deduct costs incurred under 
an arm's-length contract. The lessee must claim a transportation 
allowance by reporting it as a separate line entry on the Form MMS-2014.
    (ii) In conducting reviews and audits, MMS will examine whether the 
contract reflects more than the consideration actually transferred 
either directly or indirectly from the lessee to the processor for the 
processing. If the contract reflects more than the total consideration, 
then the MMS may require that the processing allowance be determined in 
accordance with paragraph (b) of this section.
    (iii) If MMS determines that the consideration paid pursuant to an 
arm's-length processing contract does not reflect the reasonable value 
of the processing because of misconduct by or between the contracting 
parties, or because the lessee otherwise has breached its duty to the 
lessor to market the production for the mutual benefit of the lessee and 
lessor, then MMS shall require that the processing allowance be 
determined in accordance with paragraph (b) of this section. When MMS 
determines that the value of the processing may be unreasonable, MMS 
will notify the lessee and give the lessee an opportunity to provide 
written information justifying the lessee's processing costs.
    (2) If an arm's-length processing contract includes more than one 
gas plant

[[Page 61]]

product and the processing costs attributable to each product can be 
determined from the contract, then the processing costs for each gas 
plant product shall be determined in accordance with the contract. No 
allowance may be taken for the costs of processing lease production 
which is not royalty-bearing.
    (3) If an arm's-length processing contract includes more than one 
gas plant product and the processing costs attributable to each product 
cannot be determined from the contract, the lessee shall propose an 
allocation procedure to MMS. The lessee may use its proposed allocation 
procedure until MMS issues its determination. The lessee shall submit 
all relevant data to support its proposal. MMS shall then determine the 
processing allowance based upon the lessee's proposal and any additional 
information MMS deems necessary. No processing allowance will be granted 
for the costs of processing lease production which is not royalty 
bearing. The lessee must submit the allocation proposal within 3 months 
of claiming the allocated deduction on Form MMS-2014.
    (4) Where the lessee's payments for processing under an arm's-length 
contract are not based on a dollar per unit basis, the lessee shall 
convert whatever consideration is paid to a dollar value equivalent for 
the purposes of this section.
    (b) Non-arm's-length or no contract. (1) If a lessee has a non-
arm's-length processing contract or has no contract, including those 
situations where the lessee performs processing for itself, the 
processing allowance will be based upon the lessee's reasonable actual 
costs as provided in this paragraph. All processing allowances deducted 
under a non-arm's-length or no-contract situation are subject to 
monitoring, review, audit, and adjustment. The lessee must claim a 
processing allowance by reflecting it as a separate line entry on the 
Form MMS-2014. When necessary or appropriate, MMS may direct a lessee to 
modify its estimated or actual processing allowance.
    (2) The processing allowance for non-arm's-length or no-contract 
situations shall be based upon the lessee's actual costs for processing 
during the reporting period, including operating and maintenance 
expenses, overhead, and either depreciation and a return on 
undepreciated capital investment in accordance with paragraph 
(b)(2)(iv)(A) of this section, or a cost equal to the initial 
depreciable investment in the processing plant multiplied by a rate of 
return in accordance with paragraph (b)(2)(iv)(B) of this section. 
Allowable capital costs are generally those costs for depreciable fixed 
assets (including costs of delivery and installation of capital 
equipment) which are an integral part of the processing plant.
    (i) Allowable operating expenses include: Operations supervision and 
engineering; operations labor; fuel; utilities; materials; ad valorem 
property taxes; rent; supplies; and any other directly allocable and 
attributable operating expense which the lessee can document.
    (ii) Allowable maintenance expenses include: Maintenance of the 
processing plant; maintenance of equipment; maintenance labor; and other 
directly allocable and attributable maintenance expenses which the 
lessee can document.
    (iii) Overhead directly attributable and allocable to the operation 
and maintenance of the processing plant is an allowable expense. State 
and Federal income taxes and severance taxes, including royalties, are 
not allowable expenses.
    (iv) A lessee may use either depreciation or a return on depreciable 
capital investment. When a lessee has elected to use either method for a 
processing plant, the lessee may not later elect to change to the other 
alternative without approval of the MMS.
    (A) To compute depreciation, the lessee may elect to use either a 
straight-line depreciation method based on the life of equipment or on 
the life of the reserves which the processing plant services, or a unit-
of-production method. After an election is made, the lessee may not 
change methods without MMS approval. A change in ownership of a 
processing plant shall not alter the depreciation schedule established 
by the original processor/lessee for purposes of the allowance 
calculation. With or without a change in ownership, a processing plant 
shall be depreciated

[[Page 62]]

only once. Equipment shall not be depreciated below a reasonable salvage 
value.
    (B) The MMS shall allow as a cost an amount equal to the allowable 
initial capital investment in the processing plant multiplied by the 
rate of return determined pursuant to paragraph (b)(2)(v) of this 
section. No allowance shall be provided for depreciation. This 
alternative shall apply only to plants first placed in service after 
March 1, 1988.
    (v) The rate of return must be the industrial rate associated with 
Standard and Poor's BBB rating. The rate of return must be the monthly 
average rate as published in Standard and Poor's Bond Guide for the 
first month for which the allowance is applicable. The rate must be 
redetermined at the beginning of each subsequent calendar year.
    (3) The processing allowance for each gas plant product shall be 
determined based on the lessee's reasonable and actual cost of 
processing the gas. Allocation of costs to each gas plant product shall 
be based upon generally accepted accounting principles. The lessee may 
not take an allowance for the costs of processing lease production which 
is not royalty bearing.
    (4) A lessee may apply to MMS for an exception from the requirement 
that it compute actual costs in accordance with paragraphs (b)(1) 
through (b)(3) of this section. The MMS may grant the exception only if: 
(i) The lessee has arm's-length contracts for processing other gas 
production at the same processing plant; and (ii) at least 50 percent of 
the gas processed annually at the plant is processed pursuant to arm's-
length processing contracts; if the MMS grants the exception, the lessee 
shall use as its processing allowance the volume weighted average prices 
charged other persons pursuant to arm's-length contracts for processing 
at the same plant.
    (c) Reporting requirements--(1) Arm's-length contracts. (i) The 
lessee must notify MMS of an allowance based on incurred costs by using 
a separate line entry on the Form MMS-2014.
    (ii) The MMS may require that a lessee submit arm's-length 
processing contracts and related documents. Documents shall be submitted 
within a reasonable time, as determined by MMS.
    (2)Non-arm's-length or no contract. (i) The lessee must notify MMS 
of an allowance based on the incurred costs by using a separate line 
entry on the Form MMS-2014.
    (ii) For new processing plants, the lessee's initial deduction shall 
include estimates of the allowable gas processing costs for the 
applicable period. Cost estimates shall be based upon the most recently 
available operations data for the plant or, if such data are not 
available, the lessee shall use estimates based upon industry data for 
similar gas processing plants.
    (iii) Upon request by MMS, the lessee shall submit all data used to 
prepare the allowance deduction. The data shall be provided within a 
reasonable period of time, as determined by MMS.
    (iv) If the lessee is authorized to use the volume weighted average 
prices charged other persons as its processing allowance in accordance 
with paragraph (b)(4) of this section, it shall follow the reporting 
requirements of paragraph (c)(1) of this section.
    (d) Interest and assessments. (1) If a lessee nets a processing 
allowance against the royalty value on the Form MMS-2014, the lessee 
shall be assessed an amount of up to 10 percent of the allowance netted 
not to exceed $250 per lease selling arrangement per sales period.
    (2) If a lessee deducts a processing allowance on its Form MMS-2014 
that exceeds 66\2/3\ percent of the value of the gas processed without 
obtaining prior approval of MMS under Sec. 206.158, the lessee shall pay 
interest on the excess allowance amount taken from the date such amount 
is taken to the date the lessee files an exception request with MMS.
    (3) If a lessee erroneously reports a processing allowance which 
results in an underpayment of royalties, interest shall be paid on the 
amount of that underpayment.
    (4) Interest required to be paid by this section shall be determined 
in accordance with 30 CFR 218.54.
    (e) Adjustments. (1) If the actual processing allowance is less than 
the amount the lessee has taken on Form

[[Page 63]]

MMS-2014 for each month during the allowance reporting period, the 
lessee shall pay additional royalties due plus interest computed under 
30 CFR 218.54 from the allowance reporting period when the lessee took 
the deduction to the date the lessee repays the difference to MMS. If 
the actual processing allowance is greater than the amount the lessee 
has taken on Form MMS-2014 for each month during the allowance reporting 
period, the lessee shall be entitled to a credit without interest.
    (2) For lessees transporting production from onshore Federal leases, 
the lessee must submit a corrected Form MMS-2014 to reflect actual 
costs, together with any payment, in accordance with instructions 
provided by MMS.
    (3) For lessees processing gas production from leases on the OCS, if 
the lessee's estimated processing allowance exceeds the allowance based 
on actual costs, the lessee must submit a corrected Form MMS-2014 to 
reflect actual costs, together with its payment, in accordance with 
instructions provided by MMS. If the lessee's estimated costs were less 
than the actual costs, the refund procedure will be specified by MMS.
    (f) Other processing cost determinations. The provisions of this 
section shall apply to determine processing costs when establishing 
value using a net back valuation procedure or any other procedure that 
requires deduction of processing costs.

[53 FR 1272, Jan. 15, 1988, as amended at 53 FR 45762, Nov. 14, 1988; 61 
FR 5466, Feb. 12, 1996]



Sec. 206.106  Operating allowances.

    Notwithstanding any other provisions in these regulations, an 
operating allowance may be used for the purpose of computing payment 
obligations when specified in the notice of sale and the lease. The 
allowance amount or formula shall be specified in the notice of sale and 
in the lease agreement.

[61 FR 3804, Feb. 2, 1996]



                          Subpart E--Indian Gas

    Source:  61 FR 5467, Feb. 12, 1996, unless otherwise noted.



Sec. 206.170  Purpose and scope.

    (a) This subpart is applicable to all gas production from Indian 
(Tribal and allotted) oil and gas leases (except leases on the Osage 
Indian Reservation, Osage County, Oklahoma). The purpose of this subpart 
is to establish the value of production for royalty purposes consistent 
with the mineral leasing laws, other applicable laws, and lease terms.
    (b) If the specific provisions of any statute, treaty, or settlement 
agreement between the Indian lessor and a lessee resulting from 
administrative or judicial litigation, or oil and gas lease subject to 
the requirements of this subpart are inconsistent with any regulation in 
this subpart, then the lease, statute, treaty provision or settlement 
agreement shall govern to the extent of that inconsistency.
    (c) All royalty payments made to any Tribe or allottee are subject 
to audit and adjustment.
    (d) The regulations in this subpart are intended to ensure that the 
trust responsibilities of the United States with respect to the 
administration of Indian oil and gas leases are discharged in accordance 
with the requirements of the governing mineral leasing laws, treaties, 
and lease terms.



Sec. 206.171  Definitions.

    For purposes of this subpart:
    Allowance means an approved or an (MMS)-initially accepted deduction 
in determining value for royalty purposes. Processing allowance means an 
allowance for the reasonable, actual costs incurred by the lessee for 
processing gas, or an approved or MMS-initially accepted deduction for 
costs of such processing, determined pursuant to this subpart. 
Transportation allowance means an allowance for the reasonable, actual 
costs incurred by the lessee for moving unprocessed gas, residue gas, or 
gas plant products to a point of sale or point of delivery off the 
lease, unit area, communitized area, or away from a processing plant, 
excluding gathering, or an approved or MMS-initially accepted deduction 
for costs of such transportation, determined pursuant to this subpart.
    Area means a geographic region at least as large as the defined 
limits of an oil and/or gas field, in which oil and/

[[Page 64]]

or gas lease products have similar quality, economic, and legal 
characteristics.
    Arm's-length contract means a contract or agreement that has been 
arrived at in the marketplace between independent, nonaffiliated persons 
with opposing economic interests regarding that contract. For purposes 
of this subpart, two persons are affiliated if one person controls, is 
controlled by, or is pursuant to common control with another person. For 
purposes of this subpart, based on the instruments of ownership of the 
voting securities of an entity, or based on other forms of ownership: 
ownership in excess of 50 percent constitutes control; ownership of 10 
through 50 percent creates a presumption of control; and ownership of 
less than 10 percent creates a presumption of noncontrol which MMS may 
rebut if it demonstrates actual or legal control, including the 
existence of interlocking directorates. Notwithstanding any other 
provisions of this subpart, contracts between relatives, either by blood 
or by marriage, are not arm's-length contracts. MMS may require the 
lessee to certify ownership control. To be considered arm's-length for 
any production month, a contract must meet the requirements of this 
definition for that production month, as well as when the contract was 
executed.
    Audit means a review, conducted in accordance with generally 
accepted accounting and auditing standards, of royalty payment 
compliance activities of lessees or other interest holders who pay 
royalties, rents, or bonuses on Indian leases.
    BIA means the Bureau of Indian Affairs of the Department of the 
Interior.
    BLM means the Bureau of Land Management of the Department of the 
Interior.
    Compression means the process of raising the pressure of gas.
    Condensate means liquid hydrocarbons (normally exceeding 40 degrees 
of API gravity) recovered at the surface without resorting to 
processing. Condensate is the mixture of liquid hydrocarbons that 
results from condensation of petroleum hydrocarbons existing initially 
in a gaseous phase in an underground reservoir.
    Contract means any oral or written agreement, including amendments 
or revisions thereto, between two or more persons and enforceable by law 
that with due consideration creates an obligation.
    Field means a geographic region situated over one or more subsurface 
oil and gas reservoirs encompassing at least the outermost boundaries of 
all oil and gas accumulations known to be within those reservoirs 
vertically projected to the land surface. Onshore fields are usually 
given names and their official boundaries are often designated by oil 
and gas regulatory agencies in the respective States in which the fields 
are located.
    Gas means any fluid, either combustible or noncombustible, 
hydrocarbon or nonhydrocarbon, which is extracted from a reservoir and 
which has neither independent shape nor volume, but tends to expand 
indefinitely. It is a substance that exists in a gaseous or rarefied 
state pursuant to standard temperature and pressure conditions.
    Gas plant products means separate marketable elements, compounds, or 
mixtures, whether in liquid, gaseous, or solid form, resulting from 
processing gas, excluding residue gas.
    Gathering means the movement of lease production to a central 
accumulation and/or treatment point on the lease, unit or communitized 
area, or to a central accumulation or treatment point off the lease, 
unit or communitized area as approved by BLM operations personnel for 
onshore leases.
    Gross proceeds (for royalty payment purposes) means the total monies 
and other consideration accruing to an oil and gas lessee for the 
disposition of unprocessed gas, residue gas, or gas plant products 
produced. Gross proceeds includes, but is not limited to, payments to 
the lessee for certain services such as compression, dehydration, 
measurement, and/or field gathering to the extent that the lessee is 
obligated to perform them at no cost to the Indian lessor, and payments 
for gas processing rights. Gross proceeds, as applied to gas, also 
includes but is not limited to reimbursements for severance taxes

[[Page 65]]

and other reimbursements. Tax reimbursements are part of the gross 
proceeds accruing to a lessee even though the Indian royalty interest 
may be exempt from taxation. Monies and other consideration, including 
the forms of consideration identified in this paragraph, to which a 
lessee is contractually or legally entitled but which it does not seek 
to collect through reasonable efforts are also part of gross proceeds.
    Indian allottee means any Indian for whom land or an interest in 
land is held in trust by the United States or who holds title subject to 
Federal restriction against alienation.
    Indian Tribe means any Indian Tribe, band, nation, pueblo, 
community, rancheria, colony, or other group of Indians for which any 
land or interest in land is held in trust by the United States or which 
is subject to Federal restriction against alienation.
    Lease means any contract, profit-share arrangement, joint venture, 
or other agreement issued or approved by the United States pursuant to a 
mineral leasing law that authorizes exploration for, development or 
extraction of, or removal of lease products--or the land area covered by 
that authorization, whichever is required by the context.
    Lease products means any leased minerals attributable to, 
originating from, or allocated to Indian leases.
    Lessee means any person to whom an Indian Tribe, or an Indian 
allottee issues a lease, and any person who has been assigned an 
obligation to make royalty or other payments required by the lease. This 
includes any person who has an interest in a lease as well as an 
operator or payor who has no interest in the lease but who has assumed 
the royalty payment responsibility.
    Like-quality lease products means lease products which have similar 
chemical, physical, and legal characteristics.
    Marketable condition means lease products which are sufficiently 
free from impurities and otherwise in a condition that they will be 
accepted by a purchaser pursuant to a sales contract typical for the 
field or area.
    Marketing affiliate means an affiliate of the lessee whose function 
is to acquire only the lessee's production and to market that 
production.
    Minimum royalty means that minimum amount of annual royalty that the 
lessee must pay as specified in the lease or in applicable leasing 
regulations.
    MMS means the Minerals Management Service of the Department of the 
Interior.
    Net-back method (or work-back method) means a method for calculating 
market value of gas at the lease. Pursuant to this method, costs of 
transportation, processing, or manufacturing are deducted from the 
proceeds received for the gas, residue gas or gas plant products, and 
any extracted, processed, or manufactured products, or from the value of 
the gas, residue gas or gas plant products, and any extracted, 
processed, or manufactured products, at the first point at which 
reasonable values for any such products may be determined by a sale 
pursuant to an arm's-length contract or comparison to other sales of 
such products, to ascertain value at the lease.
    Net output means the quantity of residue gas and each gas plant 
product that a processing plant produces.
    Net profit share (for applicable Indian leases) means the specified 
share of the net profit from production of oil and gas as provided in 
the agreement.
    Person means any individual, firm, corporation, association, 
partnership, consortium, or joint venture (when established as a 
separate entity).
    Posted price means the price, net of all adjustments for quality and 
location, specified in publicly available price bulletins or other price 
notices available as part of normal business operations for quantities 
of unprocessed gas, residue gas, or gas plant products in marketable 
condition.
    Processing means any process designed to remove elements or 
compounds (hydrocarbon and nonhydrocarbon) from gas, including 
absorption, adsorption, or refrigeration. Field processes which normally 
take place on or near the lease, such as natural pressure reduction, 
mechanical separation, heating, cooling, dehydration, and compression, 
are not considered processing. The changing of pressures and/

[[Page 66]]

or temperatures in a reservoir is not considered processing.
    Residue gas means that hydrocarbon gas consisting principally of 
methane resulting from processing gas.
    Selling arrangement means the individual contractual arrangements 
pursuant to which sales or dispositions of gas, residue gas and gas 
plant products are made. Selling arrangements are described by 
illustration in the MMS Royalty Management Program Oil and Gas Payor 
Handbook.
    Spot sales agreement means a contract wherein a seller agrees to 
sell to a buyer a specified amount of unprocessed gas, residue gas, or 
gas plant products at a specified price over a fixed period, usually of 
short duration, which does not normally require a cancellation notice to 
terminate, and which does not contain an obligation, nor imply an 
intent, to continue in subsequent periods.
    Warranty contract means a long-term contract entered into prior to 
1970, including any amendments thereto, for the sale of gas wherein the 
producer agrees to sell a specific amount of gas and the gas delivered 
in satisfaction of this obligation may come from fields or sources 
outside of the designated fields.



Sec. 206.172  Valuation standards--unprocessed gas.

    (a)(1) This section applies to the valuation of all gas that is not 
processed and all gas that is processed but is sold or otherwise 
disposed of by the lessee pursuant to an arm's-length contract prior to 
processing (including all gas where the lessee's arm's-length contract 
for the sale of that gas prior to processing provides for the value to 
be determined on the basis of a percentage of the purchaser's proceeds 
resulting from processing the gas). This section also applies to 
processed gas that must be valued prior to processing in accordance with 
Sec. 206.175 of this subpart. Where the lessee's contract includes a 
reservation of the right to process the gas and the lessee exercises 
that right, Sec. 206.173 of this subpart shall apply instead of this 
section.
    (2) The value of production, for royalty purposes, of gas subject to 
this subpart shall be the value of gas determined pursuant to this 
section less applicable allowances determined pursuant to this subpart.
    (3)(i) For any Indian leases which provide that the Secretary may 
consider the highest price paid or offered for a major portion of 
production (major portion) in determining value of production for 
royalty purposes, if data are available to compute a major portion MMS 
will, where practicable, compare the value determined in accordance with 
this section with the major portion. The value to be used in determining 
the value of production for royalty purposes shall be the higher of 
those two values.
    (ii) For purposes of this paragraph, major portion means the highest 
price paid or offered at the time of production for the major portion of 
gas production from the same field. The major portion will be calculated 
using like-quality gas sold pursuant to arm's-length contracts from the 
same field (or, if necessary to obtain a reasonable sample, from the 
same area) for each month. All such sales will be arrayed from highest 
price to lowest price (at the bottom). The major portion is that price 
at which 50 percent (by volume) plus 1 mcf of the gas (starting from the 
bottom) is sold.
    (b)(1)(i) The value of gas which is sold pursuant to an arm's-length 
contract shall be the gross proceeds accruing to the lessee, except as 
provided in paragraphs (b)(1)(ii) and (b)(1)(iii) of this section. The 
lessee shall have the burden of demonstrating that its contract is 
arm's-length. The value which the lessee reports, for royalty purposes, 
is subject to monitoring, review, and audit. For purposes of this 
section, gas which is sold or otherwise transferred to the lessee's 
marketing affiliate and then sold by the marketing affiliate pursuant to 
an arm's-length contract shall be valued in accordance with this 
paragraph based upon the sale by the marketing affiliate. Also, where 
the lessee's arm's-length contract for the sale of gas prior to 
processing provides for the value to be determined based upon a 
percentage of the purchaser's proceeds resulting from processing the 
gas, the value of production, for royalty purposes, shall never be less 
than a value equivalent to 100 percent of the

[[Page 67]]

value of the residue gas attributable to the processing of the lessee's 
gas.
    (ii) In conducting reviews and audits, MMS will examine whether the 
contract reflects the total consideration actually transferred either 
directly or indirectly from the buyer to the seller for the gas. If the 
contract does not reflect the total consideration, then MMS may require 
that the gas sold pursuant to that contract be valued in accordance with 
paragraph (c) of this section. Value may not be less than the gross 
proceeds accruing to the lessee, including the additional consideration.
    (iii) If MMS determines that the gross proceeds accruing to the 
lessee pursuant to an arm's-length contract do not reflect the 
reasonable value of the production because of misconduct by or between 
the contracting parties, or because the lessee otherwise has breached 
its duty to the lessor to market the production for the mutual benefit 
of the lessee and the lessor, then MMS shall require that the gas 
production be valued pursuant to paragraphs (c)(2) or (c)(3) of this 
section, and in accordance with the notification requirements of 
paragraph (e) of this section. When MMS determines that the value may be 
unreasonable, MMS will notify the lessee and give the lessee an 
opportunity to provide written information justifying the lessee's 
value.
    (2) Notwithstanding the provisions of paragraph (b)(1) of this 
section, the value of gas sold pursuant to a warranty contract shall be 
determined by MMS, and due consideration will be given to all valuation 
criteria specified in this section. The lessee must request a value 
determination in accordance with paragraph (g) of this section for gas 
sold pursuant to a warranty contract; provided, however, that any value 
determination for a warranty contract in effect on the effective date of 
these regulations shall remain in effect until modified by MMS.
    (3) MMS may require a lessee to certify that its arm's-length 
contract provisions include all of the consideration to be paid by the 
buyer, either directly or indirectly, for the gas.
    (c) The value of gas subject to this section which is not sold 
pursuant to an arm's-length contract shall be the reasonable value 
determined in accordance with the first applicable of the following 
methods:
    (1) The gross proceeds accruing to the lessee pursuant to a sale 
pursuant to its non-arm's-length contract (or other disposition other 
than by an arm's-length contract), provided that those gross proceeds 
are equivalent to the gross proceeds derived from, or paid pursuant to, 
comparable arm's-length contracts for purchases, sales, or other 
dispositions of like-quality gas in the same field (or, if necessary to 
obtain a reasonable sample, from the same area). In evaluating the 
comparability of arm's-length contracts for the purposes of these 
regulations, the following factors shall be considered: price, time of 
execution, duration, market or markets served, terms, quality of gas, 
volume, and such other factors as may be appropriate to reflect the 
value of the gas;
    (2) A value determined by consideration of other information 
relevant in valuing like-quality gas, including gross proceeds pursuant 
to arm's-length contracts for like-quality gas in the same field or 
nearby fields or areas, posted prices for gas, prices received in arm's-
length spot sales of gas, other reliable public sources of price or 
market information, and other information as to the particular lease 
operation or the salability of the gas; or
    (3) A net-back method or any other reasonable method to determine 
value.
    (d)(1) Notwithstanding any other provisions of this section, except 
paragraph (h) of this section, if the maximum price permitted by Federal 
law at which gas may be sold is less than the value determined pursuant 
to this section, then MMS shall accept such maximum price as the value. 
For purposes of this section, price limitations set by any State or 
local government shall not be considered as a maximum price permitted by 
Federal law.
    (2) The limitation prescribed in paragraph (d)(1) of this section 
shall not apply to gas sold pursuant to a warranty contract and valued 
pursuant to paragraph (b)(2) of this section.
    (e)(1) Where the value is determined pursuant to paragraph (c) of 
this section, the lessee shall retain all data relevant to the 
determination of royalty value. Such data shall be subject

[[Page 68]]

to review and audit, and MMS will direct a lessee to use a different 
value if it determines that the reported value is inconsistent with the 
requirements of these regulations.
    (2) Any Indian lessee will make available upon request to the 
authorized MMS or Indian representatives, to the Office of the Inspector 
General of the Department of the Interior, or other person authorized to 
receive such information, arm's-length sales and volume data for like-
quality production sold, purchased or otherwise obtained by the lessee 
from the field or area or from nearby fields or areas.
    (3) A lessee shall notify MMS if it has determined value pursuant to 
paragraph (c)(2) or (c)(3) of this section. The notification shall be by 
letter to MMS Associate Director for Royalty Management or his/her 
designee. The letter shall identify the valuation method to be used and 
contain a brief description of the procedure to be followed. The 
notification required by this paragraph is a one-time notification due 
no later than the end of the month following the month the lessee first 
reports royalties on a Form MMS-2014 using a valuation method authorized 
by paragraph (c)(2) or (c)(3) of this section, and each time there is a 
change in a method pursuant to paragraph (c)(2) or (c)(3) of this 
section.
    (f) If MMS determines that a lessee has not properly determined 
value, the lessee shall pay the difference, if any, between royalty 
payments made based upon the value it has used and the royalty payments 
that are due based upon the value established by MMS. The lessee shall 
also pay interest on that difference computed pursuant to 30 CFR 218.54. 
If the lessee is entitled to a credit, MMS will provide instructions for 
the taking of that credit.
    (g) The lessee may request a value determination from MMS. In that 
event, the lessee shall propose to MMS a value determination method, and 
may use that method in determining value for royalty purposes until MMS 
issues its decision. The lessee shall submit all available data relevant 
to its proposal. MMS shall expeditiously determine the value based upon 
the lessee's proposal and any additional information MMS deems 
necessary. In making a value determination MMS may use any of the 
valuation criteria authorized by this subpart. That determination shall 
remain effective for the period stated therein. After MMS issues its 
determination, the lessee shall make the adjustments in accordance with 
paragraph (f) of this section.
    (h) Notwithstanding any other provision of this section, pursuant to 
no circumstances shall the value of production for royalty purposes be 
less than the gross proceeds accruing to the lessee for lease 
production, less applicable allowances determined pursuant to this 
subpart.
    (i) The lessee is required to place gas in marketable condition at 
no cost to the Indian lessor unless otherwise provided in the lease 
agreement. Where the value established pursuant to this section is 
determined by a lessee's gross proceeds, that value shall be increased 
to the extent that the gross proceeds have been reduced because the 
purchaser, or any other person, is providing certain services the cost 
of which ordinarily is the responsibility of the lessee to place the gas 
in marketable condition.
    (j) Value shall be based on the highest price a prudent lessee can 
receive through legally enforceable claims pursuant to its contract. If 
there is no contract revision or amendment, and the lessee fails to take 
proper or timely action to receive prices or benefits to which it is 
entitled, it must pay royalty at a value based upon that obtainable 
price or benefit. Contract revisions or amendments shall be in writing 
and signed by all parties to an arm's-length contract. If the lessee 
makes timely application for a price increase or benefit allowed 
pursuant to its contract but the purchaser refuses, and the lessee takes 
reasonable measures, which are documented, to force purchaser 
compliance, the lessee will owe no additional royalties unless or until 
monies or consideration resulting from the price increase or additional 
benefits are received. This paragraph shall not be construed to permit a 
lessee to avoid its royalty payment obligation in situations where a 
purchaser fails to pay, in whole or in part or timely, for a quantity of 
gas.

[[Page 69]]

    (k) Notwithstanding any provision in these regulations to the 
contrary, no review, reconciliation, monitoring, or other like process 
that results in a redetermination by MMS of value pursuant to this 
section shall be considered final or binding as against the Indian 
Tribes or allottees until the audit period is formally closed.
    (l) Certain information submitted to MMS to support valuation 
proposals, including transportation, processing, or extraordinary cost 
allowances, is exempted from disclosure by the Freedom of Information 
Act, 5 U.S.C. 552, or other Federal law. Any data specified by law to be 
privileged, confidential, or otherwise exempt will be maintained in a 
confidential manner in accordance with applicable law and regulations. 
All requests for information about determinations made pursuant to this 
subpart are to be submitted in accordance with the Freedom of 
Information Act regulation of the Department of the Interior, 43 CFR 
part 2. Nothing in this section is intended to limit or diminish in any 
manner whatsoever the right of an Indian lessor to obtain any and all 
information as such lessor may be lawfully entitled from MMS or such 
lessor's lessee directly pursuant to the terms of the lease, 30 U.S.C. 
1733, or other applicable law.



Sec. 206.173  Valuation standards--processed gas.

    (a)(1) This section applies to the valuation of all gas that is 
processed by the lessee and any other gas production to which this 
subpart applies and that is not subject to the valuation provisions of 
Sec. 206.172 of this part. This section applies where the lessee's 
contract includes a reservation of the right to process the gas and the 
lessee exercises that right.
    (2) The value of production, for royalty purposes, of gas subject to 
this section shall be the combined value of the residue gas and all gas 
plant products determined pursuant to this section, plus the value of 
any condensate recovered downstream of the point of royalty settlement 
without resorting to processing determined pursuant to section of this 
part, less applicable transportation allowances and processing 
allowances determined pursuant to this subpart.
    (3)(i) For any Indian leases which provide that the Secretary may 
consider the highest price paid or offered for a major portion of 
production (major portion) in determining value for royalty purposes, if 
data are available to compute a major portion MMS will, where 
practicable, compare the values determined in accordance with this 
section for any lease product with the major portion determined for that 
lease product. The value to be used in determining the value of 
production for royalty purposes shall be the higher of those two values.
    (ii) For purposes of this paragraph, major portion means the highest 
price paid or offered at the time of production for the major portion of 
gas production from the same field, or for residue gas or gas plant 
products from the same processing plant, as applicable. The major 
portion will be calculated using like-quality lease products sold 
pursuant to arm's-length contracts from the same field or processing 
plant (or, if necessary to obtain a reasonable sample, from the same 
area or nearby processing plants) for each month. All such sales will be 
arrayed from highest price to lowest price (at the bottom). The major 
portion is that price at which 50 percent (by volume) plus 1 mcf of the 
gas (starting from the bottom) is sold, or for gas plant products, 50 
percent (by volume) plus 1 unit.
    (b)(1)(i) The value of the residue gas or any gas plant product 
which is sold pursuant to an arm's-length contract shall be the gross 
proceeds accruing to the lessee, except as provided in paragraphs 
(b)(1)(ii) and (b)(1)(iii) of this section. The lessee shall have the 
burden of demonstrating that its contract is arm's-length. The value 
that the lessee reports for royalty purposes is subject to monitoring, 
review, and audit. For purposes of this section, residue gas or any gas 
plant product which is sold or otherwise transferred to the lessee's 
marketing affiliate and then sold by the marketing affiliate pursuant to 
an arm's-length contract shall be valued in accordance with this 
paragraph based upon the sale by the marketing affiliate.

[[Page 70]]

    (ii) In conducting these reviews and audits, MMS will examine 
whether or not the contract reflects the total consideration actually 
transferred either directly or indirectly from the buyer to the seller 
for the residue gas or gas plant product. If the contract does not 
reflect the total consideration, then MMS may require that the residue 
gas or gas plant product sold pursuant to that contract be valued in 
accordance with paragraph (c) of this section. Value may not be less 
than the gross proceeds accruing to the lessee, including the additional 
consideration.
    (iii) If MMS determines that the gross proceeds accruing to the 
lessee pursuant to an arm's-length contract do not reflect the 
reasonable value of the residue gas or gas plant product because of 
misconduct by or between the contracting parties, or because the lessee 
otherwise has breached its duty to the lessor to market the production 
for the mutual benefit of the lessee and the lessor, then MMS shall 
require that the residue gas or gas plant product be valued pursuant to 
paragraphs (c)(2) or (c)(3) of this section, and in accordance with the 
notification requirements of paragraph (e) of this section. When MMS 
determines that the value may be unreasonable, MMS will notify the 
lessee and give the lessee an opportunity to provide written information 
justifying the lessee's value.
    (2) Notwithstanding the provisions of paragraph (b)(1) of this 
section, the value of residue gas sold pursuant to a warranty contract 
shall be determined by MMS, and due consideration will be given to all 
valuation criteria specified in this section. The lessee must request a 
value determination in accordance with paragraph (g) of this section for 
gas sold pursuant to a warranty contract; provided, however, that any 
value determination for a warranty contract in effect on the effective 
date of these regulations shall remain in effect until modified by MMS.
    (3) MMS may require a lessee to certify that its arm's-length 
contract provisions include all of the consideration to be paid by the 
buyer, either directly or indirectly, for the residue gas or gas plant 
product.
    (c) The value of residue gas or any gas plant product which is not 
sold pursuant to an arm's-length contract shall be the reasonable value 
determined in accordance with the first applicable of the following 
methods:
    (1) The gross proceeds accruing to the lessee pursuant to a sale 
pursuant to its non-arm's-length contract (or other disposition other 
than by an arm's-length contract), provided that those gross proceeds 
are equivalent to the gross proceeds derived from, or paid pursuant to, 
comparable arm's-length contracts for purchases, sales, or other 
dispositions of like quality residue gas or gas plant products from the 
same processing plant (or, if necessary to obtain a reasonable sample, 
from nearby plants). In evaluating the comparability of arm's-length 
contracts for the purposes of these regulations, the following factors 
shall be considered: price, time of execution, duration, market or 
markets served, terms, quality of residue gas or gas plant products, 
volume, and such other factors as may be appropriate to reflect the 
value of the residue gas or gas plant products;
    (2) A value determined by consideration of other information 
relevant in valuing like-quality residue gas or gas plant products, 
including gross proceeds pursuant to arm's-length contracts for like-
quality residue gas or gas plant products from the same gas plant or 
other nearby processing plants, posted prices for residue gas or gas 
plant products, prices received in spot sales of residue gas or gas 
plant products, other reliable public sources of price or market 
information, and other information as to the particular lease operation 
or the salability of such residue gas or gas plant products; or
    (3) A net-back method or any other reasonable method to determine 
value.
    (d)(1) Notwithstanding any other provisions of this section, except 
paragraph (h) of this section, if the maximum price permitted by Federal 
law at which any residue gas or gas plant products may be sold is less 
than the value determined pursuant to this section, then MMS shall 
accept such maximum price as the value. For the purposes of this 
section, price limitations set by any State or local government shall 
not be considered as a maximum price permitted by Federal law.

[[Page 71]]

    (2) The limitation prescribed by paragraph (d)(1) of this section 
shall not apply to residue gas sold pursuant to a warranty contract and 
valued pursuant to paragraph (b)(2) of this section.
    (e)(1) Where the value is determined pursuant to paragraph (c) of 
this section, the lessee shall retain all data relevant to the 
determination of royalty value. Such data shall be subject to review and 
audit, and MMS will direct a lessee to use a different value if it 
determines upon review or audit that the reported value is inconsistent 
with the requirements of these regulations.
    (2) The Indian lessee will make available upon request to the 
authorized MMS, or Indian representatives, to the Office of the 
Inspector General of the Department of the Interior, or other persons 
authorized to receive such information, arm's-length sales and volume 
data for like-quality residue gas and gas plant products sold, purchased 
or otherwise obtained by the lessee from the same processing plant or 
from nearby processing plants.
    (3) A lessee shall notify MMS if it has determined any value 
pursuant to paragraph (c)(2) or (c)(3) of this section. The notification 
shall be by letter to MMS Associate Director for Royalty Management or 
his/her designee. The letter shall identify the valuation method to be 
used and contain a brief description of the procedure to be followed. 
The notification required by this paragraph is a one-time notification 
due no later than the end of the month following the month the lessee 
first reports royalties on a Form MMS-2014 using a valuation method 
authorized by paragraph (c)(2) or (c)(3) of this section, and each time 
there is a change in a method pursuant to paragraph (c)(2) or (c)(3) of 
this section.
    (f) If MMS determines that a lessee has not properly determined 
value, the lessee shall pay the difference, if any, between royalty 
payments made based upon the value it has used and the royalty payments 
that are due based upon the value established by MMS. The lessee shall 
also pay interest computed on that difference pursuant to 30 CFR 218.54. 
If the lessee is entitled to a credit, MMS will provide instructions for 
the taking of that credit.
    (g) The lessee may request a value determination from MMS. In that 
event, the lessee shall propose to MMS a value determination method, and 
may use that method in determining value for royalty purposes until MMS 
issues its decision. The lessee shall submit all available data relevant 
to its proposal. MMS shall expeditiously determine the value based upon 
the lessee's proposal and any additional information MMS deems 
necessary. In making a value determination, MMS may use any of the 
valuation criteria authorized by this subpart. That determination shall 
remain effective for the period stated therein. After MMS issues its 
determination, the lessee shall make the adjustments in accordance with 
paragraph (f) of this section.
    (h) Notwithstanding any other provision of this section, pursuant to 
no circumstances shall the value of production for royalty purposes be 
less than the gross proceeds accruing to the lessee for residue gas and/
or any gas plant products, less applicable transportation allowances and 
processing allowances determined pursuant to this subpart.
    (i) The lessee is required to place residue gas and gas plant 
products in marketable condition at no cost to the Indian lessor unless 
otherwise provided in the lease agreement. Where the value established 
pursuant to this section is determined by a lessee's gross proceeds, 
that value shall be increased to the extent that the gross proceeds have 
been reduced because the purchaser, or any other person, is providing 
certain services the cost of which ordinarily is the responsibility of 
the lessee to place the residue gas or gas plant products in marketable 
condition.
    (j) Value shall be based on the highest price a prudent lessee can 
receive through legally enforceable claims pursuant to its contract. 
Absent contract revision or amendment, if the lessee fails to take 
proper or timely action to receive prices or benefits to which it is 
entitled it must pay royalty at a value based upon that obtainable price 
or benefit. Contract revisions or amendments shall be in writing and 
signed by all parties to an arm's-length contract. If the lessee makes 
timely application

[[Page 72]]

for a price increase or benefit allowed pursuant to its contract but the 
purchaser refuses, and the lessee takes reasonable measures, which are 
documented, to force purchaser compliance, the lessee will owe no 
additional royalties unless or until monies or consideration resulting 
from the price increase or additional benefits are received. This 
paragraph shall not be construed to permit a lessee to avoid its royalty 
payment obligation in situations where a purchaser fails to pay, in 
whole or in part, or timely, for a quantity of residue gas or gas plant 
product.
    (k) Notwithstanding any provision in these regulations to the 
contrary, no review, reconciliation, monitoring, or other like process 
that results in a redetermination by MMS of value pursuant to this 
section shall be considered final or binding against the Indian Tribes 
or allottees until the audit period is formally closed.
    (l) Certain information submitted to MMS to support valuation 
proposals, including transportation allowances, processing allowances or 
extraordinary cost allowances, is exempted from disclosure by the 
Freedom of Information Act, 5 U.S.C. 552, or other Federal law. Any data 
specified by law to be privileged, confidential, or otherwise exempt, 
will be maintained in a confidential manner in accordance with 
applicable law and regulations. All requests for information about 
determinations made pursuant to this part are to be submitted in 
accordance with the Freedom of Information Act regulation of the 
Department of the Interior, 43 CFR part 2. Nothing in this section is 
intended to limit or diminish in any manner whatsoever the right of an 
Indian lessor to obtain any and all information as such lessor may be 
lawfully entitled from MMS or such lessor's lessee directly pursuant to 
the terms of the lease, 30 U.S.C. 1733, or other applicable law.



Sec. 206.174  Determination of quantities and qualities for computing royalties.

    (a)(1) Royalties shall be computed on the basis of the quantity and 
quality of unprocessed gas at the point of royalty settlement approved 
by BLM for onshore leases.
    (2) If the value of gas determined pursuant to Sec. 206.172 of this 
subpart is based upon a quantity and/or quality that is different from 
the quantity and/or quality at the point of royalty settlement, as 
approved by BLM or MMS, that value shall be adjusted for the differences 
in quantity and/or quality.
    (b)(1) For residue gas and gas plant products, the quantity basis 
for computing royalties due is the monthly net output of the plant even 
though residue gas and/or gas plant products may be in temporary 
storage.
    (2) If the value of residue gas and/or gas plant products determined 
pursuant to Sec. 206.173 of this subpart is based upon a quantity and/or 
quality of residue gas and/or gas plant products that is different from 
that which is attributable to a lease, determined in accordance with 
paragraph (c) of this section, that value shall be adjusted for the 
differences in quantity and/or quality.
    (c) The quantity of the residue gas and gas plant products 
attributable to a lease shall be determined according to the following 
procedure:
    (1) When the net output of the processing plant is derived from gas 
obtained from only one lease, the quantity of the residue gas and gas 
plant products on which computations of royalty are based is the net 
output of the plant.
    (2) When the net output of a processing plant is derived from gas 
obtained from more than one lease producing gas of uniform content, the 
quantity of the residue gas and gas plant products allocable to each 
lease shall be in the same proportions as the ratios obtained by 
dividing the amount of gas delivered to the plant from each lease by the 
total amount of gas delivered from all leases.
    (3) When the net output of a processing plant is derived from gas 
obtained from more than one lease producing gas of nonuniform content, 
the quantity of the residue gas allocable to each lease will be 
determined by multiplying the amount of gas delivered to the plant from 
the lease by the residue gas content of the gas, and dividing the 
arithmetical product thus obtained by the sum of the similar 
arithmetical products separately obtained for all leases from which gas 
is delivered to

[[Page 73]]

the plant, and then multiplying the net output of the residue gas by the 
arithmetic quotient obtained. The net output of gas plant products 
allocable to each lease will be determined by multiplying the amount of 
gas delivered to the plant from the lease by the gas plant product 
content of the gas, and dividing the arithmetical product thus obtained 
by the sum of the similar arithmetical products separately obtained for 
all leases from which gas is delivered to the plant, and then 
multiplying the net output of each gas plant product by the arithmetic 
quotient obtained.
    (4) A lessee may request MMS approval of other methods for 
determining the quantity of residue gas and gas plant products allocable 
to each lease. If approved, such method will be applicable to all gas 
production from Indian leases that is processed in the same plant.
    (d)(1) No deductions may be made from the royalty volume or royalty 
value for actual or theoretical losses. Any actual loss of unprocessed 
gas that may be sustained prior to the royalty settlement metering or 
measurement point will not be subject to royalty provided that such loss 
is determined to have been unavoidable by BLM .
    (2) Except as provided in paragraph (d)(1) of this section and 30 
CFR 202.171(c), royalties are due on 100 percent of the volume 
determined in accordance with paragraphs (a) through (c) of this 
section. There can be no reduction in that determined volume for actual 
losses after the quantity basis has been determined or for theoretical 
losses that are claimed to have taken place. Royalties are due on 100 
percent of the value of the unprocessed gas, residue gas, and/or gas 
plant products as provided in this subpart, less applicable allowances. 
There can be no deduction from the value of the unprocessed gas, residue 
gas, and/or gas plant products to compensate for actual losses after the 
quantity basis has been determined, or for theoretical losses that are 
claimed to have taken place.



Sec. 206.175  Accounting for comparison.

    (a) Except as provided in paragraph (b) of this section, where the 
lessee (or a person to whom the lessee has transferred gas pursuant to a 
non-arm's-length contract or without a contract) processes the lessee's 
gas and after processing the gas the residue gas is not sold pursuant to 
an arm's-length contract, the value, for royalty purposes, shall be the 
greater of (1) the combined value, for royalty purposes, of the residue 
gas and gas plant products resulting from processing the gas determined 
pursuant to Sec. 206.173 of this subpart, plus the value, for royalty 
purposes, of any condensate recovered downstream of the point of royalty 
settlement without resorting to processing determined pursuant to 
Sec. 206.52 of this subpart; or (2) the value, for royalty purposes, of 
the gas prior to processing determined in accordance with Sec. 206.172 
of this subpart.
    (b) The requirement for accounting for comparison contained in the 
terms of leases, particularly Indian leases, will govern as provided in 
Sec. 206.170(b) of this subpart. When accounting for comparison is 
required by the lease terms, such accounting for comparison shall be 
determined in accordance with paragraph (a) of this section.



Sec. 206.176  Transportation allowances--general.

    (a) Where the value of gas has been determined pursuant to 
Sec. 206.172 or Sec. 206.173 of this subpart at a point (e.g., sales 
point or point of value determination) off the lease, MMS shall allow a 
deduction for the reasonable actual costs incurred by the lessee to 
transport unprocessed gas, residue gas, and gas plant products from a 
lease to a point off the lease including, if appropriate, transportation 
from the lease to a gas processing plant off the lease and from the 
plant to a point away from the plant.
    (b) Transportation costs must be allocated among all products 
produced and transported as provided in Sec. 206.177.
    (c)(1) Except as provided in paragraph (c)(3) of this section, for 
unprocessed gas valued in accordance with Sec. 206.172 of this subpart, 
the transportation allowance deduction on the basis of a selling 
arrangement shall not exceed 50 percent of the value of the unprocessed 
gas determined in accordance with Sec. 206.172 of this subpart.

[[Page 74]]

    (2) Except as provided in paragraph (c)(3) of this section, for gas 
production valued in accordance with Sec. 206.173 of this subpart the 
transportation allowance deduction on the basis of a selling arrangement 
shall not exceed 50 percent of the value of the residue gas or gas plant 
product determined in accordance with Sec. 206.173 of this subpart. For 
purposes of this section, natural gas liquids shall be considered one 
product.
    (3) Upon request of a lessee, MMS may approve a transportation 
allowance deduction in excess of the limitations prescribed by 
paragraphs (c)(1) and (c)(2) of this section. The lessee must 
demonstrate that the transportation costs incurred in excess of the 
limitations prescribed in paragraphs (c)(1) and (c)(2) of this section 
were reasonable, actual, and necessary. An application for exception 
(using Form MMS-4393, Request to Exceed Regulatory Allowance Limitation) 
shall contain all relevant and supporting documentation necessary for 
MMS to make a determination. Pursuant to no circumstances shall the 
value for royalty purposes pursuant to any selling arrangement be 
reduced to zero.
    (d) If, after a review and/or audit, MMS determines that a lessee 
has improperly determined a transportation allowance authorized by this 
subpart, then the lessee shall pay any additional royalties, plus 
interest, determined in accordance with 30 CFR 218.54, or shall be 
entitled to a credit, without interest.



Sec. 206.177  Determination of transportation allowances.

    (a) Arm's-length transportation contracts.(1)(i) For transportation 
costs incurred by a lessee pursuant to an arm's-length contract, the 
transportation allowance shall be the reasonable, actual costs incurred 
by the lessee for transporting the unprocessed gas, residue gas and/or 
gas plant products pursuant to that contract, except as provided in 
paragraphs (a)(1)(ii) and (a)(1)(iii) of this section, subject to 
monitoring, review, audit, and adjustment. The lessee shall have the 
burden of demonstrating that its contract is arm's-length. Such 
allowances shall be subject to the provisions of paragraph (f) of this 
section. Before any deduction may be taken, the lessee must submit a 
completed page one of Form MMS-4295 (and Schedule 1), Gas Transportation 
Allowance Report, in accordance with paragraph (c)(1) of this section. A 
transportation allowance may be claimed retroactively for a period of 
not more than 3 months prior to the first day of the month that Form 
MMS-4295 is filed with MMS, unless MMS approves a longer period upon a 
showing of good cause by the lessee.
    (ii) In conducting reviews and audits, MMS will examine whether or 
not the contract reflects more than the consideration actually 
transferred either directly or indirectly from the lessee to the 
transporter for the transportation. If the contract reflects more than 
the total consideration, then MMS may require that the transportation 
allowance be determined in accordance with paragraph (b) of this 
section.
    (iii) If MMS determines that the consideration paid pursuant to an 
arm's-length transportation contract does not reflect the reasonable 
value of the transportation because of misconduct by or between the 
contracting parties, or because the lessee otherwise has breached its 
duty to the lessor to market the production for the mutual benefit of 
the lessee and the lessor, then MMS shall require that the 
transportation allowance be determined in accordance with paragraph (b) 
of this section. When MMS determines that the value of the 
transportation may be unreasonable, MMS will notify the lessee and give 
the lessee an opportunity to provide written information justifying the 
lessee's transportation costs.
    (2)(i) If an arm's-length transportation contract includes more than 
one product in a gaseous phase and the transportation costs attributable 
to each product cannot be determined from the contract, the total 
transportation costs shall be allocated in a consistent and equitable 
manner to each of the products transported in the same proportion as the 
ratio of the volume of each product (excluding waste products which have 
no value) to the volume of all products in the gaseous phase (excluding 
waste products which have no value). Except as provided in this 
paragraph, no allowance may be

[[Page 75]]

taken for the costs of transporting lease production which is not 
royalty bearing without MMS approval.
    (ii) Notwithstanding the requirements of paragraph (i), the lessee 
may propose to MMS a cost allocation method on the basis of the values 
of the products transported. MMS shall approve the method unless it 
determines that it is not consistent with the purposes of the 
regulations in this subpart.
    (3) If an arm's-length transportation contract includes both gaseous 
and liquid products and the transportation costs attributable to each 
cannot be determined from the contract, the lessee shall propose an 
allocation procedure to MMS. The lessee may use the transportation 
allowance determined in accordance with its proposed allocation 
procedure until MMS issues its determination on the acceptability of the 
cost allocation. The lessee shall submit all relevant data to support 
its proposal. The initial proposal must be submitted by June 30, 1988, 
or within 3 months after the last day of the month for which the lessee 
requests a transportation allowance, whichever is later (unless MMS 
approves a longer period). MMS shall then determine the gas 
transportation allowance based upon the lessee's proposal and any 
additional information MMS deems necessary.
    (4) Where the lessee's payments for transportation pursuant to an 
arm's-length contract are not based on a dollar per unit, the lessee 
shall convert whatever consideration is paid to a dollar value 
equivalent for the purposes of this section.
    (5) Where an arm's-length sales contract price or a posted price 
includes a provision whereby the listed price is reduced by a 
transportation factor, MMS will not consider the transportation factor 
to be a transportation allowance. The transportation factor may be used 
in determining the lessee's gross proceeds for the sale of the product. 
The transportation factor may not exceed 50 percent of the base price of 
the product without MMS approval.
    (b) Non-arm's-length or no contract. (1) If a lessee has a non-
arm's-length transportation contract or has no contract, including those 
situations where the lessee performs transportation services for itself, 
the transportation allowance will be based upon the lessee's reasonable 
actual costs as provided in this paragraph. All transportation 
allowances deducted pursuant to a non-arm's-length or no contract 
situation are subject to monitoring, review, audit, and adjustment. 
Before any estimated or actual deduction may be taken, the lessee must 
submit a completed Form MMS-4295 in accordance with paragraph (c)(2) of 
this section. A transportation allowance may be claimed retroactively 
for a period of not more than 3 months prior to the first day of the 
month that Form MMS-4295 is filed with MMS, unless MMS approves a longer 
period upon a showing of good cause by the lessee. MMS will monitor the 
allowance deductions to ensure that deductions are reasonable and 
allowable. When necessary or appropriate, MMS may direct a lessee to 
modify its actual transportation allowance deduction.
    (2) The transportation allowance for non-arm's-length or no-contract 
situations shall be based upon the lessee's actual costs for 
transportation during the reporting period, including operating and 
maintenance expenses, overhead, and either depreciation and a return on 
undepreciated capital investment in accordance with paragraph 
(b)(2)(iv)(A) of this section, or a cost equal to the initial 
depreciable investment in the transportation system multiplied by a rate 
of return in accordance with paragraph (b)(2)(iv)(B) of this section. 
Allowable capital costs are generally those costs for depreciable fixed 
assets (including costs of delivery and installation of capital 
equipment) which are an integral part of the transportation system.
    (i) Allowable operating expenses include: Operations supervision and 
engineering; operations labor; fuel; utilities; materials; ad valorem 
property taxes; rent; supplies; and any other directly allocable and 
attributable operating expense which the lessee can document.

[[Page 76]]

    (ii) Allowable maintenance expenses include: Maintenance of the 
transportation system; maintenance of equipment; maintenance labor; and 
other directly allocable and attributable maintenance expenses which the 
lessee can document.
    (iii) Overhead directly attributable and allocable to the operation 
and maintenance of the transportation system is an allowable expense. 
State and Federal income taxes and severance taxes and other fees, 
including royalties, are not allowable expenses.
    (iv) A lessee may use either depreciation or a return on depreciable 
capital investment. After a lessee has elected to use either method for 
a transportation system, the lessee may not later elect to change to the 
other alternative without approval of MMS.
    (A) To compute depreciation, the lessee may elect to use either a 
straight-line depreciation method based on the life of equipment or on 
the life of the reserves which the transportation system services, or a 
unit of production method. After an election is made, the lessee may not 
change methods without MMS approval. A change in ownership of a 
transportation system shall not alter the depreciation schedule 
established by the original transporter/lessee for purposes of the 
allowance calculation. With or without a change in ownership, a 
transportation system shall be depreciated only once. Equipment shall 
not be depreciated below a reasonable salvage value.
    (B) MMS shall allow as a cost an amount equal to the allowable 
initial capital investment in the transportation system multiplied by 
the rate of return determined pursuant to paragraph (b)(2)(v) of this 
section. No allowance shall be provided for depreciation. This 
alternative shall apply only to transportation facilities first placed 
in service after March 1, 1988.
    (v) The rate of return shall be the industrial rate associated with 
Standard and Poor's BBB rating. The rate of return shall be the monthly 
average rate as published in Standard and Poor's Bond Guide for the 
first month of the reporting period for which the allowance is 
applicable and shall be effective during the reporting period. The rate 
shall be redetermined at the beginning of each subsequent transportation 
allowance reporting period (which is determined pursuant to paragraph 
(c) of this section).
    (3)(i) The deduction for transportation costs shall be determined on 
the basis of the lessee's cost of transporting each product through each 
individual transportation system. Where more than one product in a 
gaseous phase is transported, the allocation of costs to each of the 
products transported shall be made in a consistent and equitable manner 
in the same proportion as the ratio of the volume of each product 
(excluding waste products which have no value) to the volume of all 
products in the gaseous phase (excluding waste products which have no 
value). Except as provided in this paragraph, the lessee may not take an 
allowance for transporting a product which is not royalty bearing 
without MMS approval.
    (ii) Notwithstanding the requirements of paragraph (i), the lessee 
may propose to MMS a cost allocation method on the basis of the values 
of the products transported. MMS shall approve the method unless it 
determines that it is not consistent with the purposes of the 
regulations in this part.
    (4) Where both gaseous and liquid products are transported through 
the same transportation system, the lessee shall propose a cost 
allocation procedure to MMS. The lessee may use the transportation 
allowance determined in accordance with its proposed allocation 
procedure until MMS issues its determination on the acceptability of the 
cost allocation. The lessee shall submit all relevant data to support 
its proposal. The initial proposal must be submitted by June 30, 1988 or 
within 3 months after the last day of the month for which the lessee 
begins the transportation, whichever is later, unless MMS approves a 
longer period. MMS shall then determine the transportation allowance 
based upon the lessee's proposal and any additional information MMS 
deems necessary.
    (5) A lessee may apply to MMS for an exception from the requirement 
that it compute actual costs in accordance with paragraphs (b)(1) 
through (b)(4) of

[[Page 77]]

this section. MMS will grant the exception only if the lessee has a 
tariff for the transportation system approved by the Federal Energy 
Regulatory Commission (FERC) for Indian leases. MMS shall deny the 
exception request if it determines that the tariff is excessive as 
compared to arm's-length transportation charges by pipelines, owned by 
the lessee or others, providing similar transportation services in that 
area. If there are no arm's-length transportation charges, MMS shall 
deny the exception request if: (i) No FERC cost analysis exists and the 
FERC has declined to investigate pursuant to MMS timely objections upon 
filing; and (ii) the tariff significantly exceeds the lessee's actual 
costs for transportation as determined pursuant to this section.
    (c) Reporting requirements. (1) Arm's-length contracts. (i) With the 
exception of those transportation allowances specified in paragraphs 
(c)(1)(v) and (c)(1)(vi) of this section, the lessee shall submit page 
one of the initial Form MMS-4295 (and Schedule 1) prior to, or at the 
same time as, the transportation allowance determined pursuant to an 
arm's-length contract is reported on Form MMS-2014, Report of Sales and 
Royalty Remittance. A Form MMS-4295 received by the end of the month 
that the Form MMS-2014 is due shall be considered to be timely received.
    (ii) The initial Form MMS-4295 shall be effective for a reporting 
period beginning the month that the lessee is first authorized to deduct 
a transportation allowance and shall continue until the end of the 
calendar year, or until the applicable contract or rate terminates or is 
modified or amended, whichever is earlier.
    (iii) After the initial reporting period and for succeeding 
reporting periods, lessees must submit page one of Form MMS-4295 (and 
Schedule 1) within 3 months after the end of the calendar year, or after 
the applicable contract or rate terminates or is modified or amended, 
whichever is earlier, unless MMS approves a longer period (during which 
period the lessee shall continue to use the allowance from the previous 
reporting period).
    (iv) MMS may require that a lessee submit arm's-length 
transportation contracts, production agreements, operating agreements, 
and related documents. Documents shall be submitted within a reasonable 
time, as determined by MMS.
    (v) Transportation allowances which are based on arm's-length 
contracts and which are in effect at the time these regulations become 
effective will be allowed to continue until such allowances terminate. 
For the purposes of this section, only those allowances that have been 
approved by MMS in writing shall qualify as being in effect at the time 
these regulations become effective.
    (vi) MMS may establish, in appropriate circumstances, reporting 
requirements which are different from the requirements of this section.
    (2) Non-arm's-length or no contract. (i) With the exception of those 
transportation allowances specified in paragraphs (c)(2)(v), 
(c)(2)(vii), and (c)(2)(viii) of this section, the lessee shall submit 
an initial Form MMS-4295 prior to, or at the same time as, the 
transportation allowance determined pursuant to a non-arm's-length 
contract or no contract situation is reported on Form MMS-2014, Report 
of Sales and Royalty Remittance. A Form MMS-4295 received by the end of 
the month that the Form MMS-2014 is due shall be considered to be timely 
received. The initial report may be based upon estimated costs.
    (ii) The initial Form MMS-4295 shall be effective for a reporting 
period beginning the month that the lessee first is authorized to deduct 
a transportation allowance and shall continue until the end of the 
calendar year, or until the transportation pursuant to the non-arm's-
length contract or the no contract situation terminates, whichever is 
earlier.
    (iii) For calendar-year reporting periods succeeding the initial 
reporting period, the lessee shall submit a completed Form MMS-4295 
containing the actual costs for the previous reporting period. If the 
transportation is continuing, the lessee shall include on Form MMS-4295 
its estimated costs for the next calendar year. The estimated 
transportation allowance shall be based on the actual costs for the 
previous reporting period plus or minus

[[Page 78]]

any adjustments which are based on the lessee's knowledge of decreases 
or increases which will affect the allowance. Form MMS-4295 must be 
received by MMS within 3 months after the end of the previous reporting 
period, unless MMS approves a longer period (during which period the 
lessee shall continue to use the allowance from the previous reporting 
period).
    (iv) For new transportation facilities or arrangements, the lessee's 
initial Form MMS-4295 shall include estimates of the allowable 
transportation costs for the applicable period. Cost estimates shall be 
based upon the most recently available operations data for the 
transportation system, or if such data are not available, the lessee 
shall use estimates based upon industry data for similar transportation 
systems.
    (v) Non-arm's-length contract or no contract based transportation 
allowances which are in effect at the time these regulations become 
effective will be allowed to continue until such allowances terminate. 
For the purposes of this section, only those allowances that have been 
approved by MMS in writing shall qualify as being in effect at the time 
these regulations become effective.
    (vi) Upon request by MMS, the lessee shall submit all data used to 
prepare its Form MMS-4295. The data shall be provided within a 
reasonable period of time, as determined by MMS.
    (vii) MMS may establish in appropriate circumstances, reporting 
requirements which are different from the requirements of this section.
    (viii) If the lessee is authorized to use its FERC-approved tariff 
as its transportation cost in accordance with paragraph (b)(5) of this 
section, it shall follow the reporting requirements of paragraph (c)(1) 
of this section.
    (3) MMS may establish reporting dates for individual lessees 
different than those specified in this subpart in order to provide more 
effective administration. Lessees will be notified of any change in 
their reporting period.
    (4) Transportation allowances must be reported as a separate line 
item on Form MMS-2014, unless MMS approves a different reporting 
procedure.
    (d) Interest assessments for incorrect or late reports and failure 
to report. (1) If a lessee deducts a processing allowance on its Form 
MMS-2014 without complying with the requirements of this section, the 
lessee shall pay interest only on the amount of such deduction until the 
requirements of this section are complied with. The lessee also shall 
repay the amount of any allowance which is disallowed by this section.
    (2) If a lessee erroneously reports a transportation allowance which 
results in an underpayment of royalties, interest shall be paid on the 
amount of that underpayment.
    (3) Interest required to be paid by this section shall be determined 
in accordance with 30 CFR 218.54.
    (e) Adjustments. (1) If the actual transportation allowance is less 
than the amount the lessee has taken on Form MMS-2014 for each month 
during the allowance form reporting period, the lessee shall be required 
to pay additional royalties due plus interest computed pursuant to 30 
CFR 218.54, retroactive to the first day of the first month the lessee 
is authorized to deduct a transportation allowance. If the actual 
transportation allowance is greater than the amount the lessee has taken 
on Form MMS-2014 for each month during the allowance form reporting 
period, the lessee shall be entitled to a credit, without interest.
    (2) For lessees transporting production from onshore Indian leases, 
the lessee must submit a corrected Form MMS-2014 to reflect actual 
costs, together with any payment, in accordance with instructions 
provided by MMS.
    (f) Actual or theoretical losses. Notwithstanding any other 
provisions of this subpart, for other than arm's-length contracts no 
cost shall be allowed for transportation which results from payments 
(either volumetric or for value) for actual or theoretical losses. This 
section does not apply when the transportation allowance is based upon a 
FERC or state regulatory agency approved tariff.
    (g) Other transportation cost determinations. The provisions of this 
section shall apply to determine transportation costs when establishing 
value using a net-back valuation procedure or any other procedure that 
requires deduction of transportation costs.

[[Page 79]]



Sec. 206.178  Processing allowances--general.

    (a) Where the value of gas is determined pursuant to Sec. 206.173 of 
this subpart, a deduction shall be allowed for the reasonable actual 
costs of processing.
    (b) Processing costs must be allocated among the gas plant products. 
A separate processing allowance must be determined for each gas plant 
product and processing plant relationship. Natural gas liquids (NGL's) 
shall be considered as one product.
    (c)(1) Except as provided in paragraph (d)(2) of this section, the 
processing allowance shall not be applied against the value of the 
residue gas. Where there is no residue gas MMS may designate an 
appropriate gas plant product against which no allowance may be applied.
    (2) Except as provided in paragraph (c)(3) of this section, the 
processing allowance deduction on the basis of an individual product 
shall not exceed 66\2/3\ percent of the value of each gas plant product 
determined in accordance with Sec. 206.173 of this subpart (such value 
to be reduced first for any transportation allowances related to 
postprocessing transportation authorized by Sec. 206.176 of this 
subpart).
    (3) Upon request of a lessee, MMS may approve a processing allowance 
in excess of the limitation prescribed by paragraph (c)(2) of this 
section. The lessee must demonstrate that the processing costs incurred 
in excess of the limitation prescribed in paragraph (c)(2) of this 
section were reasonable, actual, and necessary. An application for 
exception (using Form MMS-4393, Request to Exceed Regulatory Allowance 
Limitation) shall contain all relevant and supporting documentation for 
MMS to make a determination. Under no circumstances shall the value for 
royalty purposes of any gas plant product be reduced to zero.
    (d)(1) Except as provided in paragraph (d)(2) of this section, no 
processing cost deduction shall be allowed for the costs of placing 
lease products in marketable condition, including dehydration, 
separation, compression, or storage, even if those functions are 
performed off the lease or at a processing plant. Where gas is processed 
for the removal of acid gases, commonly referred to as ``sweetening,'' 
no processing cost deduction shall be allowed for such costs unless the 
acid gases removed are further processed into a gas plant product. In 
such event, the lessee shall be eligible for a processing allowance as 
determined in accordance with this subpart. However, MMS will not grant 
any processing allowance for processing lease production which is not 
royalty bearing.
    (2)(i) If the lessee incurs extraordinary costs for processing gas 
production from a gas production operation, it may apply to MMS for an 
allowance for those costs which shall be in addition to any other 
processing allowance to which the lessee is entitled pursuant to this 
section. Such an allowance may be granted only if the lessee can 
demonstrate that the costs are, by reference to standard industry 
conditions and practice, extraordinary, unusual, or unconventional.
    (ii) Prior MMS approval to continue an extraordinary processing cost 
allowance is not required. However, to retain the authority to deduct 
the allowance the lessee must report the deduction to MMS in a form and 
manner prescribed by MMS.
    (e) If MMS determines that a lessee has improperly determined a 
processing allowance authorized by this subpart, then the lessee shall 
pay any additional royalties, plus interest determined in accordance 
with 30 CFR 218.54, or shall be entitled to a credit, without interest.



Sec. 206.179  Determination of processing allowances.

    (a) Arm's-length processing contracts. (1)(i) For processing costs 
incurred by a lessee pursuant to an arm's-length contract, the 
processing allowance shall be the reasonable actual costs incurred by 
the lessee for processing the gas pursuant to that contract, except as 
provided in paragraphs (a)(1)(ii) and (a)(1)(iii) of this section, 
subject to monitoring, review, audit, and adjustment. The lessee shall 
have the burden of demonstrating that its contract is arm's-length. 
Before any deduction may be taken, the lessee must submit a completed 
page one of Form MMS-

[[Page 80]]

4109, Gas Processing Allowance Summary Report, in accordance with 
paragraph (c)(1) of this section. A processing allowance may be claimed 
retroactively for a period of not more than 3 months prior to the first 
day of the month that Form MMS-4109 is filed with MMS, unless MMS 
approves a longer period upon a showing of good cause by the lessee.
    (ii) In conducting reviews and audits, MMS will examine whether the 
contract reflects more than the consideration actually transferred 
either directly or indirectly from the lessee to the processor for the 
processing. If the contract reflects more than the total consideration, 
then MMS may require that the processing allowance be determined in 
accordance with paragraph (b) of this section.
    (iii) If MMS determines that the consideration paid pursuant to an 
arm's-length processing contract does not reflect the reasonable value 
of the processing because of misconduct by or between the contracting 
parties, or because the lessee otherwise has breached its duty to the 
lessor to market the production for the mutual benefit of the lessee and 
lessor, then MMS shall require that the processing allowance be 
determined in accordance with paragraph (b) of this section. When MMS 
determines that the value of the processing may be unreasonable, MMS 
will notify the lessee and give the lessee an opportunity to provide 
written information justifying the lessee's processing costs.
    (2) If an arm's-length processing contract includes more than one 
gas plant product and the processing costs attributable to each product 
can be determined from the contract, then the processing costs for each 
gas plant product shall be determined in accordance with the contract. 
No allowance may be taken for the costs of processing lease production 
which is not royalty-bearing.
    (3) If an arm's-length processing contract includes more than one 
gas plant product and the processing costs attributable to each product 
cannot be determined from the contract, the lessee shall propose an 
allocation procedure to MMS. The lessee may use its proposed allocation 
procedure until MMS issues its determination. The lessee shall submit 
all relevant data to support its proposal. The initial proposal must be 
submitted by June 30, 1988 or within 3 months after the last day of the 
month for which the lessee requests a processing allowance, whichever is 
later (unless MMS approves a longer period). MMS shall then determine 
the processing allowance based upon the lessee's proposal and any 
additional information MMS deems necessary. No processing allowance will 
be granted for the costs of processing lease production which is not 
royalty bearing.
    (4) Where the lessee's payments for processing pursuant to an arm's-
length contract are not based on a dollar per unit basis, the lessee 
shall convert whatever consideration is paid to a dollar value 
equivalent for the purposes of this section.
    (b) Non-arm's-length or no contract. (1) If a lessee has a non-
arm's-length processing contract or has no contract, including those 
situations where the lessee performs processing for itself, the 
processing allowance will be based upon the lessee's reasonable actual 
costs as provided in this paragraph. All processing allowances deducted 
pursuant to a non-arm's-length or no contract situation are subject to 
monitoring, review, audit, and adjustment. Before any estimated or 
actual deduction may be taken, the lessee must submit a completed Form 
MMS-4109 in accordance with paragraph (c)(2) of this section. A 
processing allowance may be claimed retroactively for a period of not 
more than 3 months prior to the first day of the month that Form MMS-
4109 is filed with MMS, unless MMS approves a longer period upon a 
showing of good cause by the lessee. MMS will monitor the allowance 
deduction to ensure that deductions are reasonable and allowable. When 
necessary or appropriate, MMS may direct a lessee to modify its actual 
processing allowance.
    (2) The processing allowance for non-arm's-length or no contract 
situations shall be based upon the lessee's actual costs for processing 
during the reporting period, including operating and maintenance 
expenses, overhead, and either depreciation and a return on

[[Page 81]]

undepreciated capital investment in accordance with paragraph 
(b)(2)(iv)(A) of this section, or a cost equal to the initial 
depreciable investment in the processing plant multiplied by a rate of 
return in accordance with paragraph (b)(2)(iv)(B) of this section. 
Allowable capital costs are generally those costs for depreciable fixed 
assets (including costs of delivery and installation of capital 
equipment) which are an integral part of the processing plant.
    (i) Allowable operating expenses include: Operations supervision and 
engineering; operations labor; fuel; utilities; materials; ad valorem 
property taxes; rent; supplies; and any other directly allocable and 
attributable operating expense which the lessee can document.
    (ii) Allowable maintenance expenses include: maintenance of the 
processing plant; maintenance of equipment; maintenance labor; and other 
directly allocable and attributable maintenance expenses which the 
lessee can document.
    (iii) Overhead directly attributable and allocable to the operation 
and maintenance of the processing plant is an allowable expense. State 
and Federal income taxes and severance taxes, including royalties, are 
not allowable expenses.
    (iv) A lessee may use either depreciation or a return on depreciable 
capital investment. When a lessee has elected to use either method for a 
processing plant, the lessee may not later elect to change to the other 
alternative without approval of MMS.
    (A) To compute depreciation, the lessee may elect to use either a 
straight-line depreciation method based on the life of equipment or on 
the life of the reserves which the processing plant services, or a unit-
of-production method. After an election is made, the lessee may not 
change methods without MMS approval. A change in ownership of a 
processing plant shall not alter the depreciation schedule established 
by the original processor/lessee for purposes of the allowance 
calculation. With or without a change in ownership, a processing plant 
shall be depreciated only once. Equipment shall not be depreciated below 
a reasonable salvage value.
    (B) MMS shall allow as a cost an amount equal to the allowable 
initial capital investment in the processing plant multiplied by the 
rate of return determined pursuant to paragraph (b)(2)(v) of this 
section. No allowance shall be provided for depreciation. This 
alternative shall apply only to plants first placed in service after 
March 1, 1988.
    (v) The rate of return shall be the industrial rate associated with 
Standard and Poor's BBB rating. The rate of return shall be the monthly 
average rate as published in Standard and Poor's Bond Guide for the 
first month of the reporting period for which the allowance is 
applicable and shall be effective during the reporting period. The rate 
shall be redetermined at the beginning of each subsequent processing 
allowance reporting period (which is determined pursuant to paragraph 
(c)(2) of this section).
    (3) The processing allowance for each gas plant product shall be 
determined based on the lessee's reasonable and actual cost of 
processing the gas. Allocation of costs to each gas plant product shall 
be based upon generally accepted accounting principles. The lessee may 
not take an allowance for the costs of processing lease production which 
is not royalty bearing.
    (4) A lessee may apply to MMS for an exception from the requirement 
that it compute actual costs in accordance with paragraphs (b)(1) 
through (b)(3) of this section. MMS may grant the exception only if: (i) 
The lessee has arm's-length contracts for processing other gas 
production at the same processing plant; and (ii) at least 50 percent of 
the gas processed annually at the plant is processed pursuant to arm's-
length processing contracts; if MMS grants the exception, the lessee 
shall use as its processing allowance the volume weighted average prices 
charged other persons pursuant to arm's-length contracts for processing 
at the same plant.
    (c) Reporting requirements. (1) Arm's-length contracts. (i) With the 
exception of those processing allowances specified in paragraphs 
(c)(1)(v) and (c)(1)(vi) of this section, the lessee shall submit page 
one of the initial Form MMS-4109 (and Schedule 1) prior to the time, or

[[Page 82]]

at the same time as, the processing allowance determined pursuant to an 
arm's-length contract is reported on Form MMS-2014, Report of Sales and 
Royalty Remittance. A Form MMS-4109 received by the end of the month 
that the Form MMS-2014 is due shall be considered to be timely received.
    (ii) The initial Form MMS-4109 shall be effective for a reporting 
period beginning the month that the lessee is first authorized to deduct 
a processing allowance and shall continue until the end of the calendar 
year, or until the applicable contract or rate terminates or is modified 
or amended, whichever is earlier.
    (iii) After the initial reporting period and for succeeding 
reporting periods, lessees must submit page 1 of Form MMS-4109 (and 
Schedule 1) within 3 months after the end of the calendar year, or after 
the applicable contract or rate terminates or is modified or amended, 
whichever is earlier, unless MMS approves a longer period (during which 
period the lessee shall continue to use the allowance from the previous 
reporting period).
    (iv) MMS may require that a lessee submit arm's-length processing 
contracts and related documents. Documents shall be submitted within a 
reasonable time, as determined by MMS.
    (v) Processing allowances which are based on arm's-length contracts 
and which are in effect at the time these regulations become effective 
will be allowed to continue until such allowances terminate. For the 
purpose of this section, only those allowances that have been approved 
by MMS in writing shall qualify as being in effect at the time these 
regulations became effective.
    (vi) MMS may establish, in appropriate circumstances, reporting 
requirements which are different from the requirements of this section.
    (2) Non-arm's-length or no contract. (i) With the exception of those 
processing allowances specified in paragraphs (c)(2)(v), (c)(2)(vii) and 
(c)(2)(viii) of this section, the lessee shall submit an initial Form 
MMS-4109 prior to, or at the same time as, the processing allowance 
determined pursuant to a non-arm's-length contract or no contract 
situation is reported on Form MMS-2014, Report of Sales and Royalty 
Remittance. A Form MMS-4109 received by the end of the month that the 
Form MMS-2014 is due shall be considered to be timely received. The 
initial report may be based upon estimated costs.
    (ii) The initial Form MMS-4109 shall be effective for a reporting 
period beginning the month that the lessee first is authorized to deduct 
a processing allowance and shall continue until the end of the calendar 
year, or until the processing pursuant to the non-arm's-length contract 
or the no contract situation terminates, whichever is earlier.
    (iii) For calendar-year reporting periods succeeding the initial 
reporting period, the lessee shall submit a completed Form MMS-4109 
containing the actual costs for the previous reporting period. If gas 
processing is continuing, the lessee shall include on Form MMS-4109 its 
estimated costs for the next calendar year. The estimated gas processing 
allowance shall be based on the actual costs for the previous period 
plus or minus any adjustments which are based on the lessee's knowledge 
of decreases or increases which will affect the allowance. Form MMS-4109 
must be received by MMS within 3 months after the end of the previous 
reporting period, unless MMS approves a longer period (during which 
period the lessee shall continue to use the allowance from the previous 
reporting period).
    (iv) For new processing plants, the lessee's initial Form MMS-4109 
shall include estimates of the allowable gas processing costs for the 
applicable period. Cost estimates shall be based upon the most recently 
available operations data for the plant, or if such data are not 
available, the lessee shall use estimates based upon industry data for 
similar gas processing plants.
    (v) Processing allowances based on non-arm's-length or no contract 
situations which are in effect at the time these regulations become 
effective will be allowed to continue until such allowances terminate 
for gas production from Indian leases. For the purposes of this section, 
only those allowances that have been approved by MMS in writing shall 
qualify as being in effect at the time these regulations become 
effective.

[[Page 83]]

    (vi) Upon request by MMS, the lessee shall submit all data used by 
the lessee to prepare its Form MMS-4109. The data shall be provided 
within a reasonable period of time, as determined by MMS.
    (vii) MMS may establish, in appropriate circumstances, reporting 
requirements which are different from the requirements of this section.
    (viii) If the lessee is authorized to use the volume weighted 
average prices charged other persons as its processing allowance in 
accordance with paragraph (b)(4) of this section, it shall follow the 
reporting requirements of paragraph (c)(1) of this section.
    (3) MMS may establish reporting dates for individual leases 
different from those specified in this subpart in order to provide more 
effective administration. Lessees will be notified of any change in 
their reporting period.
    (4) Processing allowances must be reported as a separate line on the 
Form MMS-2014, unless MMS approves a different reporting procedure.
    (d) Interest assessments for incorrect or late reports and failure 
to report. (1) If a lessee deducts a processing allowance on its Form 
MMS-2014 without complying with the requirements of this section, the 
lessee shall pay interest only on the amount of such deduction until the 
requirements of this section are complied with. The lessee also shall 
repay the amount of any allowance which is disallowed by this section.
    (2) If a lessee erroneously reports a processing allowance which 
results in an underpayment of royalties, interest shall be paid on the 
amount of that underpayment.
    (3) Interest required to be paid by this section shall be determined 
in accordance with 30 CFR 218.54.
    (e) Adjustments. (1) If the actual gas processing allowance is less 
than the amount the lessee has taken on Form MMS-2014 for each month 
during the allowance form reporting period, the lessee shall be required 
to pay additional royalties due plus interest computed pursuant to 30 
CFR 218.54, retroactive to the first day of the first month the lessee 
is authorized to deduct a processing allowance. If the actual processing 
allowance is greater than the amount the lessee has taken on Form MMS-
2014 for each month during the allowance period, the lessee shall be 
entitled to a credit, without interest.
    (2) For lessees processing production from onshore Indian leases, 
the lessee must submit a corrected Form MMS-2014 to reflect actual 
costs, together with any payment, in accordance with instructions 
provided by MMS.
    (f) Other processing cost determinations. The provisions of this 
section shall apply to determine processing costs when establishing 
value using a net back valuation procedure or any other procedure that 
requires deduction of processing costs.



                         Subpart F--Federal Coal

    Source:  54 FR 1523, Jan. 13, 1989, unless otherwise noted.



Sec. 206.250  Purpose and scope.

    (a) This subpart is applicable to all coal produced from Federal 
coal leases. The purpose of this subpart is to establish the value of 
coal produced for royalty purposes, of all coal from Federal leases 
consistent with the mineral leasing laws, other applicable laws and 
lease terms.
    (b) If the specific provisions of any statute or settlement 
agreement between the United States and a lessee resulting from 
administrative or judicial litigation, or any coal lease subject to the 
requirements of this subpart, are inconsistent with any regulation in 
this subpart then the statute, lease provision, or settlement shall 
govern to the extent of that inconsistency.
    (c) All royalty payments made to the Mineral Management Service 
(MMS) are subject to later audit and adjustment.

[54 FR 1523, Jan. 13, 1989, as amended at 61 FR 5479, Feb. 12, 1996]



Sec. 206.251  Definitions.

    Ad valorem lease means a lease where the royalty due to the lessor 
is based upon a percentage of the amount or value of the coal.
    Allowance means a deduction used in determining value for royalty 
purposes. Coal washing allowance means an allowance for the reasonable, 
actual

[[Page 84]]

costs incurred by the lessee for coal washing. Transportation allowance 
means an allowance for the reasonable, actual costs incurred by the 
lessee for moving coal to a point of sale or point of delivery remote 
from both the lease and mine or wash plant.
    Area means a geographic region in which coal has similar quality and 
economic characteristics. Area boundaries are not officially designated 
and the areas are not necessarily named.
    Arm's-length contract means a contract or agreement that has been 
arrived at in the marketplace between independent, nonaffiliated persons 
with opposing economic interests regarding that contract. For purposes 
of this subpart, two persons are affiliated if one person controls, is 
controlled by, or is under common control with another person. For 
purposes of this subpart, based on the instruments of ownership of the 
voting securities of an entity, or based on other forms of ownership:
    (a) Ownership in excess of 50 percent constitutes control;
    (b) Ownership of 10 through 50 percent creates a presumption of 
control; and
    (c) Ownership of less than 10 percent creates a presumption of 
noncontrol which MMS may rebut if it demonstrates actual or legal 
control, including the existence of interlocking directorates.

Notwithstanding any other provisions of this subpart, contracts between 
relatives, either by blood or by marriage, are not arm's-length 
contracts. The MMS may require the lessee to certify ownership control. 
To be considered arm's-length for any production month, a contract must 
meet the requirements of this definition for that production month as 
well as when the contract was executed.
    Audit means a review, conducted in accordance with generally 
accepted accounting and auditing standards, of royalty payment 
compliance activities of lessees or other interest holders who pay 
royalties, rents, or bonuses on Federal leases.
    BLM means the Bureau of Land Management of the Department of the 
Interior.
    Coal means coal of all ranks from lignite through anthracite.
    Coal washing means any treatment to remove impurities from coal. 
Coal washing may include, but is not limited to, operations such as 
flotation, air, water, or heavy media separation; drying; and related 
handling (or combination thereof).
    Contract means any oral or written agreement, including amendments 
or revisions thereto, between two or more persons and enforceable by law 
that with due consideration creates an obligation.
    Gross proceeds (for royalty payment purposes) means the total monies 
and other consideration accruing to a coal lessee for the production and 
disposition of the coal produced. Gross proceeds includes, but is not 
limited to, payments to the lessee for certain services such as 
crushing, sizing, screening, storing, mixing, loading, treatment with 
substances including chemicals or oils, and other preparation of the 
coal to the extent that the lessee is obligated to perform them at no 
cost to the Federal Government. Gross proceeds, as applied to coal, also 
includes but is not limited to reimbursements for royalties, taxes or 
fees, and other reimbursements. Tax reimbursements are part of the gross 
proceeds accruing to a lessee even though the Federal royalty interest 
may be exempt from taxation. Monies and other consideration, including 
the forms of consideration identified in this paragraph, to which a 
lessee is contractually or legally entitled but which it does not seek 
to collect through reasonable efforts are also part of gross proceeds.
    Lease means any contract, profit-share arrangement, joint venture, 
or other agreement issued or approved by the United States for a Federal 
coal resource under a mineral leasing law that authorizes exploration 
for, development or extraction of, or removal of coal--or the land 
covered by that authorization, whichever is required by the context.
    Lessee means any person to whom the United States issues a lease, 
and any person who has been assigned an obligation to make royalty or 
other payments required by the lease. This includes any person who has 
an interest in a lease as well as an operator or payor who has no 
interest in the lease

[[Page 85]]

but who has assumed the royalty payment responsibility.
    Like-quality coal means coal has similar chemical and physical 
characteristics.
    Marketable condition means coal that is sufficiently free from 
impurities and otherwise in a condition that it will be accepted by a 
purchaser under a sales contract typical for that area.
    Mine means an underground or surface excavation or series of 
excavations and the surface or underground support facilities that 
contribute directly or indirectly to mining, production, preparation, 
and handling of lease products.
    Net-back method means a method for calculating market value of coal 
at the lease or mine. Under this method, costs of transportation, 
washing, handling, etc., are deducted from the ultimate proceeds 
received for the coal at the first point at which reasonable values for 
the coal may be determined by a sale pursuant to an arm's-length 
contract or by comparison to other sales of coal, to ascertain value at 
the mine.
    Net output means the quantity of washed coal that a washing plant 
produces.
    Netting is the deduction of an allowance from the sales value by 
reporting a one line net sales value, instead of correctly reporting the 
deduction as a separate line item on the Form MMS-2014.
    Person means by individual, firm, corporation, association, 
partnership, consortium, or joint venture.
    Selling arrangement means the individual contractual arrangements 
under which sales or dispositions of coal are made to a purchaser.
    Spot market price means the price received under any sales 
transaction when planned or actual deliveries span a short period of 
time, usually not exceeding one year.

[54 FR 1523, Jan. 13, 1989, as amended at 55 FR 35433, Aug. 30, 1990; 61 
FR 5479, Feb. 12, 1996]



Sec. 206.252  Information collection.

    The information collection requirements contained in this subpart 
have been approved by the Office of Management and Budget (OMB) under 44 
U.S.C. 3501 et seq. The forms, filing date, and approved OMB clearance 
numbers are identified in 30 CFR 210.10 and 30 CFR 216.10.



Sec. 206.253  Coal subject to royalties--general provisions.

    (a) All coal (except coal unavoidably lost as determined by BLM 
under 43 CFR part 3400) from a Federal lease subject to this part is 
subject to royalty. This includes coal used, sold, or otherwise disposed 
of by the lessee on or off the lease.
    (b) If a lessee receives compensation for unavoidably lost coal 
through insurance coverage or other arrangements, royalties at the rate 
specified in the lease are to be paid on the amount of compensation 
received for the coal. No royalty is due on insurance compensation 
received by the lessee for other losses.
    (c) If waste piles or slurry ponds are reworked to recover coal, the 
lessee shall pay royalty at the rate specified in the lease at the time 
the recovered coal is used, sold, or otherwise finally disposed of. The 
royalty rate shall be that rate applicable to the production method used 
to initially mine coal in the waste pile or slurry pond; i.e., 
underground mining method or surface mining method. Coal in waste pits 
or slurry ponds initially mined from Federal leases shall be allocated 
to such leases regardless of whether it is stored on Federal lands. The 
lessee shall maintain accurate records to determine to which individual 
Federal lease coal in the waste pit or slurry pond should be allocated. 
However, nothing in this section requires payment of a royalty on coal 
for which a royalty has already been paid.

[54 FR 1523, Jan. 13, 1989, as amended at 61 FR 5479, Feb. 12, 1996]



Sec. 206.254  Quality and quantity measurement standards for reporting and paying royalties.

    (a) For leases subject to Sec. 206.257 of this subpart, the quality 
of coal on which royalty is due shall be reported on the basis of 
percent sulfur, percent ash, and number of British thermal units (Btu) 
per pound of coal. Coal quality determinations shall be made at 
intervals prescribed in the lessee's sales contract. If there is no 
contract, or if the contract does not specify the

[[Page 86]]

intervals of coal quality determination, the lessee shall propose a 
quality test schedule to MMS. In no case, however, shall quality tests 
be performed less than quarterly using standard industry-recognized 
testing methods. Coal quality information shall be reported on the 
appropriate forms required under 30 CFR part 216.
    (b) For all leases subject to this subpart, the quantity of coal on 
which royalty is due shall be measured in short tons (of 2,000 pounds 
each) by methods prescribed by the BLM. Coal quantity information shall 
be reported on appropriate forms required under 30 CFR part 216 and on 
the Report of Sales and Royalty Remittance, Form MMS-2014, as required 
under 30 CFR part 210.

[54 FR 1523, Jan. 13, 1989, as amended at 57 FR 52720, Nov. 5, 1992]



Sec. 206.255  Point of royalty determination.

    (a) For all leases subject to this subpart, royalty shall be 
computed on the basis of the quantity and quality of Federal coal in 
marketable condition measured at the point of royalty measurement as 
determined jointly by BLM and MMS.
    (b) Coal produced and added to stockpiles or inventory does not 
require payment of royalty until such coal is later used, sold, or 
otherwise finally disposed of. MMS may ask BLM to increase the lease 
bond to protect the lessor's interest when BLM determines that 
stockpiles or inventory become excessive so as to increase the risk of 
degradation of the resource.
    (c) The lessee shall pay royalty at a rate specified in the lease at 
the time the coal is used, sold, or otherwise finally disposed of, 
unless otherwise provided for at Sec. 206.256(d) of this subpart.

[54 FR 1523, Jan. 13, 1989, as amended at 61 FR 5480, Feb. 12, 1996]



Sec. 206.256  Valuation standards for cents-per-ton leases.

    (a) This section is applicable to coal leases on Federal lands which 
provide for the determination of royalty on a cents-per-ton (or other 
quantity) basis.
    (b) The royalty for coal from leases subject to this section shall 
be based on the dollar rate per ton prescribed in the lease. That dollar 
rate shall be applicable to the actual quantity of coal used, sold, or 
otherwise finally disposed of, including coal which is avoidably lost as 
determine by BLM pursuant to 43 CFR part 3400.
    (c) For leases subject to this section, there shall be no allowances 
for transportation, removal of impurities, coal washing, or any other 
processing or preparation of the coal.
    (d) When a coal lease is readjusted pursuant to 43 CFR part 3400 and 
the royalty valuation method changes from a cents-per-ton basis to an ad 
valorem basis, coal which is produced prior to the effective date of 
readjustment and sold or used within 30 days of the effective date of 
readjustment shall be valued pursuant to this section. All coal that is 
not used, sold, or otherwise finally disposed of within 30 days after 
the effective date of readjustment shall be valued pursuant to the 
provisions of Sec. 206.257 of this subpart, and royalties shall be paid 
at the royalty rate specified in the readjusted lease.

[54 FR 1523, Jan. 13, 1989, as amended at 61 FR 5480, Feb. 12, 1996]



Sec. 206.257  Valuation standards for ad valorem leases.

    (a) This section is applicable to coal leases on Federal lands which 
provide for the determination of royalty as a percentage of the amount 
of value of coal (ad valorem). The value for royalty purposes of coal 
from such leases shall be the value of coal determined under this 
section, less applicable coal washing allowances and transportation 
allowances determined under Secs. 206.258 through 206.262 of this 
subpart, or any allowance authorized by Sec. 206.265 of this subpart. 
The royalty due shall be equal to the value for royalty purposes 
multiplied by the royalty rate in the lease.
    (b)(1) The value of coal that is sold pursuant to an arm's-length 
contract shall be the gross proceeds accruing to the lessee, except as 
provided in paragraphs (b)(2), (b)(3), and (b)(5) of this section. The 
lessee shall have the burden of demonstrating that its contract is 
arm's-length. The value which the lessee reports, for royalty purposes, 
is subject to monitoring, review, and audit.

[[Page 87]]

    (2) In conducting reviews and audits, MMS will examine whether the 
contract reflects the total consideration actually transferred either 
directly or indirectly from the buyer to the seller for the coal 
produced. If the contract does not reflect the total consideration, then 
the MMS may require that the coal sold pursuant to that contract be 
valued in accordance with paragraph (c) of this section. Value may not 
be based on less than the gross proceeds accruing to the lessee for the 
coal production, including the additional consideration.
    (3) If the MMS determines that the gross proceeds accruing to the 
lessee pursuant to an arm's-length contract do not reflect the 
reasonable value of the production because of misconduct by or between 
the contracting parties, or because the lessee otherwise has breached 
its duty to the lessor to market the production for the mutual benefit 
of the lessee and the lessor, then MMS shall require that the coal 
production be valued pursuant to paragraph (c)(2) (ii), (iii), (iv), or 
(v) of this section, and in accordance with the notification 
requirements of paragraph (d)(3) of this section. When MMS determines 
that the value may be unreasonable, MMS will notify the lessee and give 
the lessee an opportunity to provide written information justifying the 
lessee's reported coal value.
    (4) The MMS may require a lessee to certify that its arm's-length 
contract provisions include all of the consideration to be paid by the 
buyer, either directly or indirectly, for the coal production.
    (5) The value of production for royalty purposes shall not include 
payments received by the lessee pursuant to a contract which the lessee 
demonstrates, to MMS's satisfaction, were not part of the total 
consideration paid for the purchase of coal production.
    (c)(1) The value of coal from leases subject to this section and 
which is not sold pursuant to an arm's-length contract shall be 
determined in accordance with this section.
    (2) If the value of the coal cannot be determined pursuant to 
paragraph (b) of this section, then the value shall be determined 
through application of other valuation criteria. The criteria shall be 
considered in the following order, and the value shall be based upon the 
first applicable criterion:
    (i) The gross proceeds accruing to the lessee pursuant to a sale 
under its non-arm's-length contract (or other disposition of produced 
coal by other than an arm's-length contract), provided that those gross 
proceeds are within the range of the gross proceeds derived from, or 
paid under, comparable arm's-length contracts between buyers and sellers 
neither of whom is affiliated with the lessee for sales, purchases, or 
other dispositions of like-quality coal produced in the area. In 
evaluating the comparability of arm's-length contracts for the purposes 
of these regulations, the following factors shall be considered: Price, 
time of execution, duration, market or markets served, terms, quality of 
coal, quantity, and such other factors as may be appropriate to reflect 
the value of the coal;
    (ii) Prices reported for that coal to a public utility commission;
    (iii) Prices reported for that coal to the Energy Information 
Administration of the Department of Energy;
    (iv) Other relevant matters including, but not limited to, published 
or publicly available spot market prices, or information submitted by 
the lessee concerning circumstances unique to a particular lease 
operation or the saleability of certain types of coal;
    (v) If a reasonable value cannot be determined using paragraphs 
(c)(2) (i), (ii), (iii), or (iv) of this section, then a net-back method 
or any other reasonable method shall be used to determine value.
    (3) When the value of coal is determined pursuant to paragraph 
(c)(2) of this section, that value determination shall be consistent 
with the provisions contained in paragraph (b)(5) of this section.
    (d)(1) Where the value is determined pursuant to paragraph (c) of 
this section, that value does not require MMS's prior approval. However, 
the lessee shall retain all data relevant to the determination of 
royalty value. Such data shall be subject to review and audit, and MMS 
will direct a lessee to use a different value if it determines that the 
reported value is inconsistent

[[Page 88]]

with the requirements of these regulations.
    (2) Any Federal lessee will make available upon request to the 
authorized MMS or State representatives, to the Inspector General of the 
Department of the Interior or other persons authorized to receive such 
information, arm's-length sales value and sales quantity data for like-
quality coal sold, purchased, or otherwise obtained by the lessee from 
the area.
    (3) A lessee shall notify MMS if it has determined value pursuant to 
paragraphs (c)(2) (ii), (iii), (iv), or (v) of this section. The 
notification shall be by letter to the Associate Director for Royalty 
Management of his/her designee. The letter shall identify the valuation 
method to be used and contain a brief description of the procedure to be 
followed. The notification required by this section is a one-time 
notification due no later than the month the lessee first reports 
royalties on the Form MMS-2014 using a valuation method authorized by 
paragraphs (c)(2) (ii), (iii), (iv), or (v) of this section, and each 
time there is a change in a method under paragraphs (c)(2) (iv) or (v) 
of this section.
    (e) If MMS determines that a lessee has not properly determined 
value, the lessee shall be liable for the difference, if any, between 
royalty payments made based upon the value it has used and the royalty 
payments that are due based upon the value established by MMS. The 
lessee shall also be liable for interest computed pursuant to 30 CFR 
218.202. If the lessee is entitled to a credit, MMS will provide 
instructions for the taking of that credit.
    (f) The lessee may request a value determination from MMS. In that 
event, the lessee shall propose to MMS a value determination method, and 
may use that method in determining value for royalty purposes until MMS 
issues its decision. The lessee shall submit all available data relevant 
to its proposal. The MMS shall expeditiously determine the value based 
upon the lessee's proposal and any additional information MMS deems 
necessary. That determination shall remain effective for the period 
stated therein. After MMS issues its determination, the lessee shall 
make the adjustments in accordance with paragraph (e) of this section.
    (g) Notwithstanding any other provisions of this section, under no 
circumstances shall the value for royalty purposes be less than the 
gross proceeds accruing to the lessee for the disposition of produced 
coal less applicable provisions of paragraph (b)(5) of this section and 
less applicable allowances determined pursuant to Secs. 206.258 through 
206.262 and Sec. 206.265 of this subpart.
    (h) The lessee is required to place coal in marketable condition at 
no cost to the Federal Government. Where the value established under 
this section is determined by a lessee's gross proceeds, that value 
shall be increased to the extent that the gross proceeds has been 
reduced because the purchaser, or any other person, is providing certain 
services, the cost of which ordinarily is the responsibility of the 
lessee to place the coal in marketable condition.
    (i) Value shall be based on the highest price a prudent lessee can 
receive through legally enforceable claims under its contract. Absent 
contract revision or amendment, if the lessee fails to take proper or 
timely action to receive prices or benefits to which it is entitled, it 
must pay royalty at a value based upon that obtainable price or benefit. 
Contract revisions or amendments shall be in writing and signed by all 
parties to an arm's-length contract, and may be retroactively applied to 
value for royalty purposes for a period not to exceed two years, unless 
MMS approves a longer period. If the lessee makes timely application for 
a price increase allowed under its contract but the purchaser refuses, 
and the lessee takes reasonable measures, which are documented, to force 
purchaser compliance, the lessee will owe no additional royalties unless 
or until monies or consideration resulting from the price increase are 
received. This paragraph shall not be construed to permit a lessee to 
avoid its royalty payment obligation in situations where a purchaser 
fails to pay, in whole or in part or timely, for a quantity of coal.
    (j) Notwithstanding any provision in these regulations to the 
contrary, no review, reconciliation, monitoring, or

[[Page 89]]

other like process that results in a redetermination by MMS of value 
under this section shall be considered final or binding as against the 
Federal Government or its beneficiaries until the audit period is 
formally closed.
    (k) Certain information submitted to MMS to support valuation 
proposals, including transportation, coal washing, or other allowances 
under Sec. 206.265 of this subpart, is exempted from disclosure by the 
Freedom of Information Act, 5 U.S.C. 522. Any data specified by the Act 
to be privileged, confidential, or otherwise exempt shall be maintained 
in a confidential manner in accordance with applicable law and 
regulations. All requests for information about determinations made 
under this part are to be submitted in accordance with the Freedom of 
Information Act regulation of the Department of the Interior, 43 CFR 
part 2.

[54 FR 1523, Jan. 13, 1989, as amended at 55 FR 35433, Aug. 30, 1990; 57 
FR 52720, Nov. 5, 1992; 61 FR 5480, Feb. 12, 1996]



Sec. 206.258  Washing allowances--general.

    (a) For ad valorem leases subject to Sec. 206.257 of this subpart, 
MMS shall, as authorized by this section, allow a deduction in 
determining value for royalty purposes for the reasonable, actual costs 
incurred to wash coal, unless the value determined pursuant to 
Sec. 206.257 of this subpart was based upon like-quality unwashed coal. 
Under no circumstances shall the washing allowance and the 
transportation allowance authorized by Sec. 206.262 of this subpart 
reduce the value for royalty purposes to zero.
    (b) If MMS determines that a lessee has improperly determined a 
washing allowance authorized by this section, then the lessee shall be 
liable for any additional royalties, plus interest determined in 
accordance with 30 CFR 218.202, or shall be entitled to a credit without 
interest.
    (c) Lessees shall not disproportionately allocate washing costs to 
Federal leases.
    (d) No cost normally associated with mining operations and which are 
necessary for placing coal in marketable condition shall be allowed as a 
cost of washing.
    (e) Coal washing costs shall only be recognized as allowances when 
the washed coal is sold and royalties are reported and paid.

[54 FR 1523, Jan. 13, 1989, as amended at 61 FR 5480, Feb. 12, 1996]



Sec. 206.259  Determination of washing allowances.

    (a) Arm's-length contracts.-- (1) For washing costs incurred by a 
lessee under an arm's-length contract, the washing allowance shall be 
the reasonable actual costs incurred by the lessee for washing the coal 
under that contract, subject to monitoring, review, audit, and possible 
future adjustment. The lessee shall have the burden of demonstrating 
that its contract is arm's-length. MMS' prior approval is not required 
before a lessee may deduct costs incurred under an arm's-length 
contract. The lessee must claim a washing allowance by reporting it as a 
separate line entry on the Form MMS-2014.
    (2) In conducting reviews and audits, MMS will examine whether the 
contract reflects more than the consideration actually transferred 
either directly or indirectly from the lessee to the washer for the 
washing. If the contract reflects more than the total consideration 
paid, then the MMS may require that the washing allowance be determined 
in accordance with paragraph (b) of this section.
    (3) If the MMS determines that the consideration paid pursuant to an 
arm's-length washing contract does not reflect the reasonable value of 
the washing because of misconduct by or between the contracting parties, 
or because the lessee otherwise has breached its duty to the lessor to 
market the production for the mutual benefit of the lessee and the 
lessor, then MMS shall require that the washing allowance be determined 
in accordance with paragraph (b) of this section. When MMS determines 
that the value of the washing may be unreasonable, MMS will notify the 
lessee and give the lessee an opportunity to provide written information 
justifying the lessee's washing costs.
    (4) Where the lessee's payments for washing under an arm's-length 
contract are not based on a dollar-per-unit

[[Page 90]]

basis, the lessee shall convert whatever consideration is paid to a 
dollar value equivalent. Washing allowances shall be expressed as a cost 
per ton of coal washed.
    (b) Non-arm's-length or no contract.-- (1) If a lessee has a non-
arm's-length contract or has no contract, including those situations 
where the lessee performs washing for itself, the washing allowance will 
be based upon the lessee's reasonable actual costs. All washing 
allowances deducted under a non-arm's-length or no contract situation 
are subject to monitoring, review, audit, and possible future 
adjustment. The lessee must claim a washing allowance by reporting it as 
a separate line entry on the Form MMS-2014. When necessary or 
appropriate, MMS may direct a lessee to modify its estimated or actual 
washing allowance.
    (2) The washing allowance for non-arm's-length or no contract 
situations shall be based upon the lessee's actual costs for washing 
during the reported period, including operating and maintenance 
expenses, overhead, and either depreciation and a return on 
undepreciated capital investment in accordance with paragraph (b)(2)(iv) 
(A) of this section, or a cost equal to the depreciable investment in 
the wash plant multiplied by the rate of return in accordance with 
paragraph (b)(2)(iv)(B) of this section. Allowable capital costs are 
generally those for depreciable fixed assets (including costs of 
delivery and installation of capital equipment) which are an integral 
part of the wash plant.
    (i) Allowable operating expenses include: Operations supervision and 
engineering; operations labor; fuel; utilities; materials; ad valorem 
property taxes, rent; supplies; and any other directly allocable and 
attributable operating expense which the lessee can document.
    (ii) Allowable maintenance expenses include: Maintenance of the wash 
plant; maintenance of equipment; maintenance labor; and other directly 
allocable and attributable maintenance expenses which the lessee can 
document.
    (iii) Overhead attributable and allocable to the operation and 
maintenance of the wash plant is an allowable expense. State and Federal 
income taxes and severance taxes, including royalities, are not 
allowable expenses.
    (iv) A lessee may use either paragraph (b)(2)(iv)(A) or (B) of this 
section. After a lessee has elected to use either method for a wash 
plant, the lessee may not later elect to change to the other alternative 
without approval of the MMS.
    (A) To compute depreciation, the lessee may elect to use either a 
straight-line depreciation method based on the life of equipment or on 
the life of the reserves which the wash plant services, whichever is 
appropriate, or a unit of production method. After an election is made, 
the lessee may not change methods without MMS approval. A change in 
ownership of a wash plant shall not alter the depreciation schedule 
established by the original operator/lessee for purposes of the 
allowance calculation. With or without a change in ownership, a wash 
plant shall be depreciated only once. Equipment shall not be depreciated 
below a reasonable salvage value.
    (B) The MMS shall allow as a cost an amount equal to the allowable 
capital investment in the wash plant multiplied by the rate of return 
determined pursuant to paragraph (b)(2)(v) of this section. No allowance 
shall be provided for depreciation. This alternative shall apply only to 
plants first placed in service or acquired after March 1, 1989.
    (v) The rate of return must be the industrial rate associated with 
Standard and Poor's BBB rating. The rate of return must be the monthly 
average rate as published in Standard and Poor's Bond Guide for the 
first month for which the allowance is applicable. The rate must be 
redetermined at the beginning of each subsequent calendar year.
    (3) The washing allowance for coal shall be determined based on the 
lessee's reasonable and actual cost of washing the coal. The lessee may 
not take an allowance for the costs of washing lease production that is 
not royalty bearing.
    (c) Reporting requirements--(1) Arm's-length contracts. (i) The 
lessee must notify MMS of an allowance based on incurred costs by using 
a separate line entry on the Form MMS-2014.

[[Page 91]]

    (ii) The MMS may require that a lessee submit arm's-length washing 
contracts and related documents. Documents shall be submitted within a 
reasonable time, as determined by MMS.
    (2) Non-arm's-length or no contract. (i) The lessee must notify MMS 
of an allowance based on the incurred costs by using a separate line 
entry on the Form MMS-2014.
    (ii) For new washing facilities or arrangements, the lessee's 
initial washing deduction shall include estimates of the allowable coal 
washing costs for the applicable period. Cost estimates shall be based 
upon the most recently available operations data for the processing 
system or, if such data are not available, the lessee shall use 
estimates based upon industry data for similar washing systems.
    (iii) Upon request by MMS, the lessee shall submit all data used to 
prepare the allowance deduction. The data shall be provided within a 
reasonable period of time, as determined by MMS.
    (d) Interest and assessments. (1) If a lessee nets a washing 
allowance on the Form MMS-2014, then the lessee shall be assessed an 
amount up to 10 percent of the allowance netted not to exceed $250 per 
lease selling arrangement per sales period.
    (2) If a lessee erroneously reports a washing allowance which 
results in an underpayment of royalties, interest shall be paid on the 
amount of that underpayment.
    (3) Interest required to be paid by this section shall be determined 
in accordance with 30 CFR 218.202.
    (e) Adjustments. (1) If the actual coal washing allowance is less 
than the amount the lessee has taken on Form MMS-2014 for each month 
during the allowance reporting period, the lessee shall pay additional 
royalties due plus interest computed under 30 CFR 218.202 from the date 
when the lessee took the deduction to the date the lessee repays the 
difference to MMS. If the actual washing allowance is greater than the 
amount the lessee has taken on Form MMS-2014 for each month during the 
allowance reporting period, the lessee shall be entitled to a credit 
without interest.
    (2) The lessee must submit a corrected Form MMS-2014 to reflect 
actual costs, together with any payment, in accordance with instructions 
provided by MMS.
    (f) Other washing cost determinations. The provisions of this 
section shall apply to determine washing costs when establishing value 
using a net-back valuation procedure or any other procedure that 
requires deduction of washing costs.

[54 FR 1523, Jan. 13, 1989, as amended at 57 FR 52720, Nov. 5, 1992; 61 
FR 5480, Feb. 12, 1996]



Sec. 206.260  Allocation of washed coal.

    (a) When coal is subjected to washing, the washed coal must be 
allocated to the leases from which it was extracted.
    (b) When the net output of coal from a washing plant is derived from 
coal obtained from only one lease, the quantity of washed coal allocable 
to the lease will be based on the net output of the washing plant.
    (c) When the net output of coal from a washing plant is derived from 
coal obtained from more than one lease, unless determined otherwise by 
BLM, the quantity of net output of washed coal allocable to each lease 
will be based on the ratio of measured quantities of coal delivered to 
the washing plant and washed from each lease compared to the total 
measured quantities of coal delivered to the washing plant and washed.



Sec. 206.261  Transportation allowances--general.

    (a) For ad valorem leases subject to Sec. 206.257 of this subpart, 
where the value for royalty purposes has been determined at a point 
remote from the lease or mine, MMS shall, as authorized by this section, 
allow a deduction in determining value for royalty purposes for the 
reasonable, actual costs incurred to:
    (1) Transport the coal from a Federal lease to a sales point which 
is remote from both the lease and mine; or
    (2) Transport the coal from a Federal lease to a wash plant when 
that plant is remote from both the lease and mine and, if applicable, 
from the wash plant to a remote sales point. In-mine transportation 
costs shall not be included in the transportation allowance.

[[Page 92]]

    (b) Under no circumstances shall the washing allowance and the 
transportation allowance authorized by Sec. 206.257 of this subpart 
reduce the value of coal under any selling arrangement to zero.
    (c)(1) When coal transported from a mine to a wash plant is eligible 
for a transportation allowance in accordance with this section, the 
lessee is not required to allocate transportation costs between the 
quantity of clean coal output and the rejected waste material. The 
transportation allowance shall be authorized for the total production 
which is transported. Transportation allowances shall be expressed as a 
cost per ton of cleaned coal transported.
    (2) For coal that is not washed at a wash plant, the transportation 
allowance shall be authorized for the total production which is 
transported. Transportation allowances shall be expressed as a cost per 
ton of coal transported.
    (3) Transportation costs shall only be recognized as allowances when 
the transported coal is sold and royalties are reported and paid.
    (d) If, after a review and/or audit, MMS determines that a lessee 
has improperly determined a transportation allowance authorized by this 
section, then the lessee shall pay any additional royalties, plus 
interest, determined in accordance with 30 CFR 218.202, or shall be 
entitled to a credit, without interest.
    (e) Lessees shall not disproportionately allocate transportation 
costs to Federal leases.

[54 FR 1523, Jan. 13, 1989, as amended at 61 FR 5481, Feb. 12, 1996]



Sec. 206.262  Determination of transportation allowances.

    (a) Arm's-length contracts. (1) For transportation costs incurred by 
a lessee pursuant to an arm's-length contract, the transportation 
allowance shall be the reasonable, actual costs incurred by the lessee 
for transporting the coal under that contract, subject to monitoring, 
review, audit, and possible future adjustment. The lessee shall have the 
burden of demonstrating that its contract is arm's-length. The lessee 
must claim a transportation allowance by reporting it as a separate line 
entry on the Form MMS-2014.
    (2) In conducting reviews and audits, MMS will examine whether the 
contract reflects more than the consideration actually transferred 
either directly or indirectly from the lessee to the transporter for the 
transportation. If the contract reflects more than the total 
consideration paid, then the MMS may require that the transportation 
allowance be determined in accordance with paragraph (b) of this 
section.
    (3) If the MMS determines that the consideration paid pursuant to an 
arm's-length transportation contract does not reflect the reasonable 
value of the transportation because of misconduct by or between the 
contracting parties, or because the lessee otherwise has breached its 
duty to the lessor to market the production for the mutual benefit of 
the lessee and the lessor, then MMS shall require that the 
transportation allowance be determined in accordance with paragraph (b) 
of this section. When MMS determines that the value of the 
transportation may be unreasonable, MMS will notify the lessee and give 
the lessee an opportunity to provide written information justifying the 
lessee's transportation costs.
    (4) Where the lessee's payments for transportation under an arm's-
length contract are not based on a dollar-per-unit basis, the lessee 
shall convert whatever consideration is paid to a dollar value 
equivalent for the purposes of this section.
    (b) Non-arm's-length or no contract--(1) If a lessee has a non-
arm's-length contract or has no contract, including those situations 
where the lessee performs transportation services for itself, the 
transportation allowance will be based upon the lessee's reasonable 
actual costs. All transportation allowances deducted under a non-arm's-
length or no contract situation are subject to monitoring, review, 
audit, and possible future adjustment. The lessee must claim a 
transportation allowance by reporting it as a separate line entry on the 
Form MMS-2014. When necessary or appropriate, MMS may direct a lessee to 
modify its estimated or actual transportation allowance deduction.
    (2) The transportation allowance for non-arm's-length or no-contract 
situations shall be based upon the lessee's

[[Page 93]]

actual costs for transportation during the reporting period, including 
operating and maintenance expenses, overhead, and either depreciation 
and a return on undepreciated capital investment in accordance with 
paragraph (b)(2)(iv)(A) of this section, or a cost equal to the 
depreciable investment in the transportation system multiplied by the 
rate of return in accordance with paragraph (b)(2)(iv)(B) of this 
section. Allowable capital costs are generally those for depreciable 
fixed assets (including costs of delivery and installation of capital 
equipment) which are an integral part of the transportation system.
    (i) Allowable operating expenses include: Operations supervision and 
engineering; operations labor; fuel; utilities; materials; ad valorem 
property taxes; rent; supplies; and any other directly allocable and 
attributable operating expense which the lessee can document.
    (ii) Allowable maintenance expenses include: Maintenance of the 
transportation system; maintenance of equipment; maintenance labor; and 
other directly allocable and attributable maintenance expenses which the 
lessee can document.
    (iii) Overhead attributable and allocable to the operation and 
maintenance of the transportation system is an allowable expense. State 
and Federal income taxes and severance taxes and other fees, including 
royalties, are not allowable expenses.
    (iv) A lessee may use either paragraph (b)(2)(iv)(A) or paragraph 
(b)(2)(iv)(B) of this section. After a lessee has elected to use either 
method for a transportation system, the lessee may not later elect to 
change to the other alternative without approval of the MMS.
    (A) To compute depreciation, the lessee may elect to use either a 
straight-line depreciation method based on the life of equipment or on 
the life of the reserves which the transportation system services, 
whichever is appropriate, or a unit of production method. After an 
election is made, the lessee may not change methods without MMS 
approval. A change in ownership of a transportation system shall not 
alter the depreciation schedule established by the original transporter/
lessee for purposes of the allowance calculation. With or without a 
change in ownership, a transportation system shall be depreciated only 
once. Equipment shall not be depreciated below a reasonable salvage 
value.
    (B) The MMS shall allow as a cost an amount equal to the allowable 
capital investment in the transportation system multiplied by the rate 
of return determined pursuant to paragraph (b)(2)(B)(v) of this section. 
No allowance shall be provided for depreciation. This alternative shall 
apply only to transportation facilities first placed in service or 
acquired after March 1, 1989.
    (v) The rate of return must be the industrial rate associated with 
Standard and Poor's BBB rating. The rate of return must be the monthly 
average rate as published in Standard and Poor's Bond Guide for the 
first month for which the allowance is applicable. The rate must be 
redetermined at the beginning of each subsequent calendar year.
    (3) A lessee may apply to MMS for exception from the requirement 
that it compute actual costs in accordance with paragraphs (b)(1) and 
(b)(2) of this section. MMS will grant the exception only if the lessee 
has a rate for the transportation approved by a Federal agency or by a 
State regulatory agency (for Federal leases). MMS shall deny the 
exception request if it determines that the rate is excessive as 
compared to arm's-length transportation charges by systems, owned by the 
lessee or others, providing similar transportation services in that 
area. If there are no arm's-length transportation charges, MMS shall 
deny the exception request if:
    (i) No Federal or State regulatory agency costs analysis exists and 
the Federal or State regulatory agency, as applicable, has declined to 
investigate under MMS timely objections upon filing; and
    (ii) The rate significantly exceeds the lessee's actual costs for 
transportation as determined under this section.
    (c) Reporting requirements-- (1) Arm's-length contracts. (i) The 
lessee must notify MMS of an allowance based on incurred costs by using 
a separate line entry on the Form MMS-2014.

[[Page 94]]

    (ii) The MMS may require that a lessee submit arm's-length 
transportation contracts, production agreements, operating agreements, 
and related documents. Documents shall be submitted within a reasonable 
time, as determined by MMS.
    (2) Non-arm's-length or no contract-- (i) The lessee must notify MMS 
of an allowance based on the incurred costs by using a separate line 
entry on Form MMS-2014.
    (ii) For new transportation facilities or arrangements, the lessee's 
initial deduction shall include estimates of the allowable coal 
transportation costs for the applicable period. Cost estimates shall be 
based upon the most recently available operations data for the 
transportation system or, if such data are not available, the lessee 
shall use estimates based upon industry data for similar transportation 
systems.
    (iii) Upon request by MMS, the lessee shall submit all data used to 
prepare the allowance deduction. The data shall be provided within a 
reasonable period of time, as determined by MMS.
    (iv)  [Reserved]
    (v) If the lessee is authorized to use its Federal- or State-agency-
approved rate as its transportation cost in accordance with paragraph 
(b)(3) of this section, it shall follow the reporting requirements of 
paragraph (c)(1) of this section.
    (d) Interest and assessments. (1) If a lessee nets a transportation 
allowance on Form MMS-2014, the lessee shall be assessed an amount of up 
to 10 percent of the allowance netted not to exceed $250 per lease 
selling arrangement per sales period.
    (e) Adjustments. (1) If the actual coal transportation allowance is 
less than the amount the lessee has taken on Form MMS-2014 for each 
month during the allowance reporting period, the lessee shall pay 
additional royalties due plus interest computed under 30 CFR 218.202 
from the date when the lessee took the deduction to the date the lessee 
repays the difference to MMS. If the actual transportation allowance is 
greater than amount the lessee has taken on Form MMS-2014 for each month 
during the allowance reporting period, the lessee shall be entitled to a 
credit without interest.
    (2) [Reserved]
    (f) Other transportation cost determinations. The provisions of this 
section shall apply to determine transportation costs when establishing 
value using a net-back valuation procedure or any other procedure that 
requires deduction of transportation costs.

[54 FR 1523, Jan. 13, 1989, as amended at 57 FR 41864, Sept. 14, 1992; 
57 FR 52720, Nov. 5, 1992; 61 FR 5481, Feb. 12, 1996]



Sec. 206.263  Contract submission.

    (a) The lessee and other payors shall submit to MMS, upon request, 
contracts for the sale of coal from ad valorem leases subject to this 
subpart. The MMS must receive the contracts within a reasonable period 
of time, as specified by MMS. Lessees shall include as part of the 
submittal requirements any contracts, agreements, contract amendments, 
or other documents that affect the gross proceeds received for the sale 
of coal, as well as any other information regarding any consideration 
received for the sale or disposition of coal that is not included in 
such contracts. At the time of its contract submittals, MMS may require 
the lessee to certify in writing that it has provided all documents and 
information that reflect the total consideration provided by purchasers 
of coal from ad valorem leases subject to this subpart. Information 
requested under this section may include contracts for both ad valorem 
and cents-per-ton leases and shall be available in the lessee's offices 
during normal business hours or provided to MMS at such time and in such 
manner as may be requested by authorized Department of the Interior 
personnel. Any oral sales arrangement negotiated by the lessee must be 
placed in a written form and be retained by the lessee. Nothing in this 
section shall be construed to limit the authority of MMS to obtain or 
have access to information pursuant to 30 CFR part 212.
    (b) Lessees and other payors shall designate, for each contract 
submitted pursuant to this section, whether the contract in arm's-length 
or non-arm's-length.
    (c) A lessee's or other payor's determination that its contract is 
arm's-length is subject to future audit to verify that the contract 
meets the criteria

[[Page 95]]

of the arm's-length contract definition in Sec. 206.251 of this subpart.
    (d) Information required to be submitted under this section that 
constitutes trade secrets and commercial and financial information that 
is identified as privileged or confidential shall not be available for 
public inspection or made public or disclosed without the consent of the 
lessee or other payor, except as otherwise provided by law or 
regulation.



Sec. 206.264  In-situ and surface gasification and liquefaction operations.

    In an ad valorem Federal coal lease is developed by in-situ or 
surface gasification or liquefaction technology, the lessee shall 
propose the value of coal for royalty purposes to MMS. The MMS will 
review the lessee's proposal and issue a value determination. The lessee 
may use its proposed value until MMS issues a value determination.



Sec. 206.265  Value enhancement of marketable coal.

    If, prior to use, sale, or other disposition, the lessee enhances 
the value of coal after the coal has been placed in marketable condition 
in accordance with Sec. 206.257(h) of this subpart, the lessee shall 
notify MMS that such processing is occurring or will occur. The value of 
that production shall be determined as follows:
    (a) A value established for the feedstock coal in marketable 
condition by application of the provisions of Sec. 206.257(c)(2)(i-iv) 
of this subpart; or,
    (b) In the event that a value cannot be established in accordance 
with subsection (a), then the value of production will be determined in 
accordance with Sec. 206.257(c)(2)(v) of this subpart and the value 
shall be the lessee's gross proceeds accruing from the disposition of 
the enhanced product, reduced by MMS-approved processing costs and 
procedures including a rate of return on investment equal to two times 
the Standard and Poor's BBB bond rate applicable under 
Sec. 206.259(b)(2)(v) of this subpart.



                     Subpart G--Other Solid Minerals



Sec. 206.301  Value basis for royalty computation.

    (a) The gross value for royalty purposes shall be the sale or 
contract unit price times the number of units sold, Provided, however, 
That where the authorized officer determines:
    (1) That a contract of sale or other business arrangement between 
the lessee and a purchaser of some or all of the commodities produced 
from the lease is not a bona fide transaction between independent 
parties because it is based in whole or in part upon considerations 
other than the value of the commodities, or (2) That no bona fide sales 
price is received for some or all of such commodities because the lessee 
is consuming them, the authorized officer shall determine their gross 
value, taking into account: (i) All prices received by the lessee in all 
bona fide transactions, (ii) Prices paid for commodities of like quality 
produced from the same general area, and (iii) Such other relevant 
factors as the authorized officer may deem appropriate; and Provided 
further, That in a situation where an estimated value is used, the 
authorized officer shall require the payment of such additional 
royalties, or allow such credits or refunds as may be necessary to 
adjust royalty payment to reflect the actual gross value.
    (b) The lessee is required to certify that the values reported for 
royalty purposes are bona fide sales not involving considerations other 
than the sale of the mineral, and he may be required by the authorized 
officer to supply supporting information.

[43 FR 10341, Mar. 13, 1978. Redesignated at 48 FR 36588, Aug. 12, 1983, 
and amended at 48 FR 44795, Sept. 30, 1983. Further redesignated at 51 
FR 15212, Apr. 22, 1986. Redesignated at 53 FR 39461, Oct. 7, 1988]



                     Subpart H--Geothermal Resources

    Source: 56 FR 57276, Nov. 8, 1991, unless otherwise noted.

[[Page 96]]



Sec. 206.350  Purpose and scope.

    (a) This subpart is applicable to all geothermal resources produced 
from Federal geothermal leases issued pursuant to the Geothermal Steam 
Act of 1970, as amended (30 U.S.C. 1001 et seq.). The purpose of this 
subpart is to establish the value of geothermal production for royalty 
purposes.
    (b) All royalty payments made to MMS are subject to audit and 
adjustment.



Sec. 206.351  Definitions.

    For purposes of this subpart:
    Arm's-length contract means a contract or agreement that has been 
arrived at in the marketplace between independent, nonaffiliated persons 
with opposing economic interests regarding that contract. For purposes 
of this subpart, two persons are affiliated if one person controls, is 
controlled by, or is under common control with, another person. For 
purposes of this subpart, based on the instruments of ownership of the 
voting securities of an entity, or based on other forms of ownership:
    (1) Ownership in excess of 50 percent constitutes control;
    (2) Ownership of 10 through 50 percent creates a rebuttable 
presumption of control; and
    (3) Ownership of less than 10 percent creates a presumption of 
noncontrol which MMS may rebut if it demonstrates actual or legal 
control, including the existence of interlocking directorates.
Notwithstanding any other provisions of this subpart, contracts between 
relatives, either by blood or by marriage, are not arm's-length 
contracts. The MMS may require the lessee to certify the claimed nature 
of ownership control. To be considered arm's-length for any production 
month, a contract must meet the requirements of this definition for the 
production month as well as when the contract was executed.
    Audit means a procedure having the same meaning and effect as that 
described at 30 CFR part 217 for verifying royalty payment compliance 
activities of lessees or other authorized persons who pay royalties, 
rents, or bonuses on Federal geothermal leases.
    Byproduct means:
    (1) Any mineral or minerals (exclusive of oil, hydrocarbon gas, and 
helium) which are found in solution or developed in association with 
geothermal fluids and which have a value of less than 75 per centum of 
the value of the geothermal energy or are not, because of quantity, 
quality, or technical difficulties in extraction and production, of 
sufficient value to warrant extraction and production by themselves, and
    (2) Commercially demineralized water.
    Byproduct recovery facility means the facility or facilities at 
which byproducts are placed in marketable condition.
    Byproduct transportation allowance means an approved allowance for 
the lessee's reasonable, actual costs, excluding gathering, incurred for 
moving byproducts, including commercially demineralized water, to a 
point of sale or point of delivery off the lease, unit area, or 
communitized area.
    Contract means any oral or written agreement, including amendments 
or revisions thereto, between two or more persons and enforceable by law 
that with due consideration creates an obligation.
    Deduction means a subtraction used in the geothermal netback 
procedure for determining the value of geothermal resources utilized by 
the lessee to generate electricity. Transmission deduction means a 
deduction for the lessee's reasonable actual costs incurred to wheel or 
transmit the electricity from the lessee's powerplant to the purchaser's 
delivery point. Generating deduction means a deduction for the lessee's 
reasonable, actual costs of generating plant tailgate electricity.
    Delivered electricity means the amount of electricity in 
kilowatthours delivered to the purchaser.
    Direct utilization means any process other than electrical 
generation in which the thermal energy of the geothermal resource is 
utilized, including, but not limited to, space heating, greenhouse 
operations, and industrial or agricultural process heat.
    Field means the land surface vertically projected over a subsurface 
geothermal reservoir encompassing at least the outermost boundaries of 
all

[[Page 97]]

geothermal accumulations known to be within that reservoir. Geothermal 
fields are usually given names and their official boundaries are often 
designated by regulatory agencies in the respective States in which the 
fields are located.
    Gathering means the efficient movement of lease production from the 
wellhead to the point of utilization.
    Geothermal netback procedure means the method of determining the 
value of geothermal resources that are utilized in a lessee-owned 
powerplant for the generation and sale of electricity by deducting the 
lessee's reasonable, actual transmission and generating costs from the 
sales price or value of the electricity to derive the value of the 
geothermal resource at the powerplant inlet.
    Geothermal resources means:
    (1) All products of geothermal processes, including indigenous 
steam, hot water, and hot brines;
    (2) Steam and other gases, hot water, and hot brines resulting from 
water, gas, or other fluids artificially introduced into geothermal 
formations;
    (3) Heat or other associated energy found in geothermal formations; 
and
    (4) Any byproducts.
    Geothermal utilization facility means a powerplant or direct 
utilization facility that utilizes the heat or other energy of the 
geothermal resource.
    Gross proceeds (for royalty purposes) means the total monies and 
other consideration accruing to a geothermal lessee for any disposition 
of geothermal resources, including total payments for the sale of 
electricity generated by the lessee from lease-produced geothermal 
resources. Gross proceeds includes, but is not limited to, payments to 
the lessee for certain services such as effluent injection, field 
operation and maintenance, drilling or workover of wells, and/or field 
gathering to the extent that the lessee is obligated to perform them at 
no cost to the Federal Government. Gross proceeds also includes, but is 
not limited to, reimbursements for production taxes and other taxes. Tax 
reimbursements are part of gross proceeds accruing to a lessee even 
though the Federal royalty interest may be exempt from taxation. Monies 
and other consideration, including the forms of consideration identified 
in this paragraph, to which a lessee is contractually or legally 
entitled but which it does not seek to collect through reasonable 
efforts are also part of gross proceeds.
    Lease means a geothermal lease issued under authority of the 
Geothermal Steam Act of 1970, as amended (30 U.S.C. 1001 et seq.), 
unless the context indicates otherwise.
    Lessee means any person to whom the United States issues a 
geothermal lease, and any person who has been assigned an obligation to 
make royalty or other payments required by the lease. This includes any 
person who has an interest in a geothermal lease as well as an operator 
or payor who has no interest in the lease but who has assumed the 
royalty payment responsibility. This also includes any affiliate of the 
lessee that utilizes the geothermal resource to generate electricity, in 
a direct utilization process, or to recover byproducts, or any affiliate 
that transports lease production.
    Like-quality lease products means lease products that have similar 
chemical, physical, and legal characteristics.
    Marketable condition means lease products that are sufficiently free 
from impurities and otherwise in a condition that they will be accepted 
by a purchaser under a sales contract typical for the field.
    Minimum royalty means the minimum amount of annual royalty as 
specified in the lease or in applicable leasing regulations that the 
lessee must pay after commencement of geothermal production in 
commercial quantities.
    No sales means the utilization or disposal of geothermal resources 
without the benefit of a sale.
    Person means any individual, firm, corporation, association, 
partnership, consortium, or joint venture (when established as a 
separate entity).
    Plant tailgate electricity means the amount of electricity in 
kilowatthours generated by the powerplant exclusive of plant parasitic 
electricity, but inclusive of any electricity generated by the 
powerplant and returned to the lease for lease operations. Plant 
tailgate electricity should be measured at, or calculated for, the high 
voltage side of

[[Page 98]]

the transformer in the plant switchyard.
    Point of utilization means the powerplant or direct utilization 
facility in which the geothermal resource (steam or hot water) is 
utilized.
    Reasonable alternative fuel means a conventional fuel (such as coal, 
oil, gas, or wood) that would normally be used as a source of heat in 
direct utilization operations.
    Secretary means the Secretary of the Department of the Interior or 
any person duly authorized to exercise the powers vested in that office.
    Selling arrangement means the individually contracted arrangements 
under which sales or dispositions of geothermal resources are made, 
including sales or dispositions of byproducts and electricity sales 
where the lessee generates electricity from lease geothermal production.
    Spot market price means the price received under any sales 
transaction when planned or actual deliveries span a short period of 
time, usually not exceeding 1 year.
    Wheeling means the transmission of electricity from a powerplant to 
the point of delivery.



Sec. 206.352  Valuation standards for electrical generation.

    (a) The value of geothermal resources produced from leases subject 
to this subpart and used to generate electricity shall be determined 
pursuant to this section.
    (b)(1)(i) The value of geothermal resources that are sold pursuant 
to an arm's-length contract shall be the gross proceeds accruing to the 
lessee, except as provided in paragraphs (b)(1)(ii) and (b)(1)(iii) of 
this section. The lessee shall have the burden of demonstrating that its 
contract is arm's-length. The value that the lessee reports for royalty 
purposes is subject to monitoring, review, and audit.
    (ii) In conducting reviews and audits, MMS will examine whether the 
contract reflects the total consideration actually transferred, either 
directly or indirectly, from the buyer to the seller for the geothermal 
resource. If the contract does not reflect the total consideration, MMS 
may require that the geothermal resource sold pursuant to that contract 
be valued in accordance with paragraph (d) of this section. Value shall 
not be less than the gross proceeds accruing to the lessee, including 
any additional consideration received.
    (iii) If MMS determines that the gross proceeds accruing to the 
lessee pursuant to an arm's-length contract do not reflect the 
reasonable value of the production because of misconduct by or between 
the contracting parties, or because the lessee otherwise has breached 
its duty to the lessor to market the production for the mutual benefit 
of the lessee and the lessor, MMS shall require the geothermal resource 
to be valued pursuant to paragraph (d) of this section, and notification 
provided to MMS in accordance with paragraph (e)(3) of this section. If 
MMS determines that the value may be unreasonable, MMS will notify the 
lessee and give the lessee an opportunity to provide written information 
justifying the lessee's value.
    (2) The MMS may require a lessee to certify that the provisions in 
its arm's-length contract include all of the consideration to be paid by 
the buyer, either directly or indirectly, for the geothermal resource.
    (c)(1) The value of geothermal resources subject to this section 
that are sold under a non-arm's-length contract shall be determined in 
accordance with the first applicable of the following paragraphs:
    (i) The gross proceeds accruing to the lessee pursuant to a sale 
under its non-arm's-length contract provided that those gross proceeds 
are not less than the gross proceeds derived from or paid under the 
lowest-priced available comparable arm's-length contract for sales of 
geothermal resources to the lessee-affiliate's same powerplant (the 
``minimum value''). If the gross proceeds under the lessee's non-arm's-
length contract are less than the ``minimum value'' under available 
comparable arm's-length contracts, or if there are no available 
comparable arm's-length contracts, value will be determined by the 
weighted average of the gross proceeds established under arm's-length 
contracts for the sale of significant quantities of geothermal resources 
to

[[Page 99]]

the same powerplant. Available contracts will mean contracts in the 
possession of the lessee, the lessee's affiliate, or MMS. In evaluating 
the comparability of arm's-length contracts for the purposes of these 
regulations, the following factors shall be considered: Time of 
execution, duration, terms, quality of the geothermal resource, volume, 
dedication to the same powerplant, and other factors that may be 
appropriate to reflect the value of the resource;
    (ii) The value determined by the geothermal netback procedure. Under 
the geothermal netback procedure, the lessee's reasonable actual costs 
for the generation and transmission of electricity shall be deducted 
from the lessee's gross proceeds received for the sale of electricity to 
determine the value of the geothermal resource. Transmission deductions 
shall be determined pursuant to Sec. 206.353 of this part. Generating 
deductions shall be determined pursuant to Sec. 206.354 of this part; or
    (iii) A value determined by any other reasonable valuation method 
approved by MMS.
    (2) Value determinations made pursuant to this paragraph are subject 
to the notification requirements of paragraph (e) of this section.
    (d)(1) The value of geothermal resources subject to this section 
that are not subject to a sales transaction (``no sales'' geothermal 
resources) but are instead utilized directly by the lessee in its own 
powerplant for the generation and sale of electricity shall be 
determined in accordance with the first applicable of the following 
paragraphs:
    (i) The weighted average of the gross proceeds established in arm's-
length contracts for the purchase of significant quantities of 
geothermal resources to operate the lessee's same powerplant. In 
evaluating the acceptability of arm's-length contracts, the following 
factors shall be considered: Time of execution, duration, terms, volume, 
quality of resource, and such other factors as may be appropriate to 
reflect the value of the resource;
    (ii) The value determined by the geothermal netback procedure. Under 
the geothermal netback procedure, the lessee's reasonable actual costs 
for the generation and transmission of electricity shall be deducted 
from the lessee's gross proceeds received for the sale of electricity to 
determine the value of the geothermal resource. Transmission deductions 
shall be determined pursuant to Sec. 206.353 of this part. Generating 
deductions shall be determined pursuant to Sec. 206.354 of this part; or
    (iii) A value determined by any other reasonable valuation method 
approved by MMS.
    (2) Value determinations made pursuant to this paragraph are subject 
to the notification requirements of paragraph (e) of this section.
    (e)(1) Pursuant to subpart H of 30 CFR part 212, the lessee shall 
retain all data relevant to the determination of royalty value, 
particularly where the value is determined pursuant to paragraph (c) or 
(d) of this section. Such data shall be subject to review and audit, and 
MMS will direct a lessee to use a different value if it determines that 
the reported value is inconsistent with the requirements of these 
regulations.
    (2) Upon request, lessees shall make available to authorized MMS 
representatives or to other authorized persons any and all contracts for 
the sale or other disposition of the lease production; contracts for the 
sale, generation, and/or transmission of electricity attributable to 
lease production; and any arm's-length sales and other data for like-
quality production sold, purchased, or otherwise obtained by the lessee 
from the field as may be necessary to support a value determination.
    (3) A lessee shall notify MMS if it has determined value pursuant to 
paragraph (c) or (d) of this section. The notification shall be by 
letter to the MMS Associate Director for Royalty Management or his/her 
designee. The letter shall identify the valuation method to be used and 
contain a brief description of the procedure to be followed. The 
notification required by this paragraph is a one-time notification due 
no later than the end of the month following the month the lessee first 
reports royalties on a Form MMS-2014 using a valuation method authorized 
by paragraph (c) or (d) of this section.

[[Page 100]]

    (f) If MMS determines that a lessee has not properly determined 
value, the lessee shall pay the difference, if any, between royalty 
payments made based upon the value it has used and the royalty payments 
that are due based upon the value established by MMS. The lessee shall 
also pay interest on that difference computed pursuant to 30 CFR 
218.302. If the lessee is entitled to a credit, MMS will provide 
instructions for the taking of that credit.
    (g) The lessee may request a value determination from MMS. In that 
event, the lessee shall propose to MMS a value determination method and 
may use that method in determining value, for royalty purposes, until 
MMS issues its decision. The lessee shall submit all available data 
relevant to its proposal. The MMS shall expeditiously determine the 
value based upon the lessee's proposal and any additional information 
MMS deems necessary. In making a value determination, MMS may use any of 
the valuation criteria consistent with this subpart. That determination 
shall remain effective for the period stated therein. After MMS issues 
its determination, the lessee shall make the adjustments in accordance 
with paragraph (f) of this section.
    (h) Notwithstanding any other provision of this section, under no 
circumstances shall the value of production for royalty purposes be less 
than the gross proceeds accruing to the lessee where geothermal 
resources are directly sold.
    (i) The lessee is required to place geothermal resources in 
marketable condition and to deliver geothermal resources to the 
powerplant at no cost to the Federal lessor. Where the value established 
pursuant to this section is determined by a lessee's gross proceeds, 
that value shall be increased to the extent that the gross proceeds have 
been reduced because the purchaser, or any other person, is providing 
certain services the cost of which ordinarily is the responsibility of 
the lessee to place the geothermal resource in marketable condition or 
deliver it to the powerplant.
    (j) Value shall be based on the highest price a prudent lessee can 
receive through legally enforceable claims under its contract. Absent 
contract revision or amendment, if the lessee fails to take proper or 
timely action to receive prices or benefits to which it is entitled, it 
must pay royalty at a value based upon that obtainable price or benefit. 
Contract revisions or amendments shall be in writing and signed by all 
parties to the contract. If the lessee makes timely application for a 
price increase or benefit allowed under its contract but the purchaser 
refuses and the lessee takes reasonable measures, which are documented, 
to force purchaser compliance, the lessee will owe no additional 
royalties unless or until monies or consideration resulting from the 
price increase or additional benefits are received. This paragraph shall 
not be construed to permit a lessee to avoid its royalty payment 
obligation in situations where a purchaser fails to pay, in whole or in 
part or timely, for a quantity of geothermal resources.
    (k) Notwithstanding any provision in these regulations to the 
contrary, no review, reconciliation, monitoring, or other like process 
that results in a redetermination by MMS of value under this section 
shall be considered final or binding as against the Federal Government 
or its beneficiaries until the audit period is formally closed.
    (l) Certain information submitted to MMS to support value 
determinations is exempted from disclosure by the Freedom of Information 
Act, 5 U.S.C. 552, or other Federal law. Any data specified by law to be 
privileged, confidential, or otherwise exempt will be maintained in a 
confidential manner in accordance with applicable law and regulations. 
All requests for information about determinations made under this 
subpart are to be submitted in accordance with the Freedom of 
Information Act regulations of the Department, 43 CFR part 2.



Sec. 206.353  Determination of transmission deductions.

    (a) Where the value of geothermal energy is determined by the 
geothermal netback procedure pursuant to paragraphs (c)(1)(ii) and 
(d)(1)(ii) of Sec. 206.352 of this subpart, a transmission deduction 
shall be subtracted from the lessee's gross proceeds received for the 
sale of electricity to determine the plant tailgate value of the 
electricity.

[[Page 101]]

The transmission deduction consists of either or both of two components:
    (1) Transmission line costs as determined pursuant to paragraph (b) 
of this section, and
    (2) Wheeling costs if the electricity is transmitted across a third-
party's transmission line under an arm's-length wheeling agreement. 
Transmission deductions are subject to the limitation prescribed in 
paragraph (c) of this section.
    (b)(1) Transmission-line costs shall be based on the lessee's actual 
costs associated with the construction and operation of a transmission 
line for the purpose of transmitting electricity attributable and 
allocable to the lessee's powerplant utilizing Federal geothermal 
resources. The monthly transmission line cost component of the 
transmission deduction is determined by multiplying the annual 
transmission line cost rate (in dollars per kilowatthour) by the amount 
of electricity delivered for the reporting month. The transmission line 
cost rate shall be redetermined annually at the beginning of the same 
month of the year in which the transmission line was placed into 
service, the same month of the year in which the powerplant was placed 
into service, or, at the lessee's option, at a time concurrent with the 
beginning of the lessee's annual corporate accounting period; Provided, 
however, the period selected must coincide with the same period chosen 
for the generating deduction pursuant to Sec. 206.354(b)(1). After a 
deduction period is chosen, the lessee may not later elect to use a 
different deduction period without MMS approval.
    (2) Allowable transmission-line costs include operating and 
maintenance expenses, overhead, and either depreciation and a return on 
undepreciated capital investment in accordance with paragraph 
(b)(2)(iv)(A) of this section, or a cost equal to the capital investment 
in the transmission line multiplied by a rate of return in accordance 
with paragraph (b)(2)(iv)(B) of this section. Allowable capital costs 
are generally those costs for depreciable assets, including costs of 
delivery and installation of capital equipment, that are an integral 
part of the transmission line. A return on capital invested in the 
purchase of real estate for transmission facilities may be allowed 
provided that the lessee demonstrates the necessity for such purchase, 
the purchased land is not on a Federal geothermal lease, and MMS 
approves the deduction; the rate of return shall be the same rate 
determined in paragraph (b)(2)(v) of this section.
    (i) Allowable operating expenses include operations supervision and 
engineering, operations labor, materials, ad valorem property taxes, 
rent, supplies, and any other directly allocable and attributable 
operating expenses that the lessee can document.
    (ii) Allowable maintenance expenses include maintenance of the 
transmission line, maintenance of equipment, maintenance labor, and 
other directly allocable and attributable maintenance expenses that the 
lessee can document.
    (iii) Overhead directly attributable and allocable to the operation 
and maintenance of the transmission line is an allowable expense. State 
and Federal income taxes and severance taxes and other fees, including 
royalties, are not allowable expenses.
    (iv) To compute costs associated with capital investment, a lessee 
may use either depreciation with a return on undepreciated capital 
investment, or a return on capital investment. After a lessee has 
elected to use either method, the lessee may not later elect to change 
to the other alternative without MMS approval.
    (A) To compute depreciation, the lessee must use a straight-line 
depreciation method based on the expected life of the geothermal 
project, usually the term of the electricity sales contract or other 
depreciation period acceptable to MMS. A change in ownership of a 
transmission line shall not alter the depreciation schedule established 
by the original lessee-owner for purposes of computing transmission line 
costs. With or without a change in ownership, a transmission line shall 
be depreciated only once. The rate of return used to compute the return 
on undepreciated capital investment shall be determined pursuant to 
paragraph (b)(2)(v) of this section.

[[Page 102]]

    (B) To compute a return on capital investment, the allowed cost 
shall be the amount equal to the allowable capital investment in the 
transmission line multiplied by the rate of return determined pursuant 
to paragraph (b)(2)(v) of this section. No allowance shall be provided 
for depreciation. This alternative shall apply only to transmission 
lines first placed into service on or after March 1, 1988.
    (v) The rate of return shall be 2 times Standard and Poor's 
industrial BBB bond rate. The rate of return shall be 2 times the 
monthly average rate as published in Standard and Poor's Bond Guide for 
the first month of the annual deduction period and shall be effective 
during the following deduction period. The rate shall be redetermined 
annually at the beginning of the same month beginning the annual 
deduction period chosen pursuant to paragraph (b)(1) of this section.
    (3) Transmission-line cost rates, determined annually, are computed 
by dividing the sum of the operating, maintenance, overhead, and capital 
costs by the annual amount of delivered electricity.
    (4) For new transmission lines, the lessee's costs for the first 
deduction period shall be based on estimated expenses (including 
overhead) for operating and maintaining the transmission line. For 
subsequent deduction periods, the transmission line costs shall be 
estimated based on the lessee's actual operating and maintenance 
expenses for the previous period adjusted for decreases or increases 
that the lessee knows will affect the deduction in the current period.
    (c) Under no circumstances shall the transmission deduction plus the 
generating deduction determined pursuant to Sec. 206.354 of this subpart 
reduce the royalty value of the geothermal resource to zero.
    (d)(1) If the actual transmission deduction determined at the end of 
the annual reporting period is less than the amount the lessee estimated 
and used in the netback procedure during the reporting period, the 
lessee shall be required to pay additional royalties retroactive to the 
first month of the reporting period, plus interest computed pursuant to 
30 CFR 218.302. If the actual transmission deduction is greater than the 
amount applied in the netback calculation, the lessee shall be entitled 
to a credit.
    (2) Lessees must submit corrected Forms MMS-2014 to reflect 
adjustments to royalty payments in accordance with MMS instructions.
    (e)(1) All transmission deductions are subject to review, audit, and 
adjustment. When necessary or appropriate, MMS may direct a lessee to 
modify its estimated or actual transmission deduction and adjust royalty 
values accordingly.
    (2) Pursuant to subpart H of 30 CFR part 212, the lessee must 
maintain all data and records supporting its transmission deduction, 
including wheeling and other transmission-related agreements. These data 
and records must be made available to MMS and other authorized personnel 
upon request, and shall be maintained in a confidential manner in 
accordance with applicable laws and regulations pursuant to Sec. 206.352 
of this subpart.
    (f) A one-time refund of royalties equal to the royalty amount of 
actual dismantlement costs attributable to the transmission line that 
are in excess of actual income attributable to the salvage of the 
transmission line will be allowed at the completion of the dismantlement 
and salvage operations.



Sec. 206.354  Determination of generating deductions.

    (a) Where the value of geothermal energy is determined by the 
geothermal netback procedure pursuant to paragraphs (c)(1)(ii) and 
(d)(1)(ii) of Sec. 206.352 of this subpart, that value shall be 
determined by deducting the lessee's reasonable actual costs incurred to 
generate electricity from the plant tailgate value of the electricity 
(usually the transmission-reduced value of the delivered electricity). 
Generating deductions are subject to the limitation prescribed in 
paragraph (c) of this section.
    (b)(1) Generating costs shall be based on the lessee's actual annual 
costs associated with the construction and operation of a geothermal 
powerplant. The monthly generating deduction is determined by 
multiplying the annual generating cost rate (in dollars per

[[Page 103]]

kilowatthour) by the amount of plant tailgate electricity measured (or 
computed) for the reporting month. The generating cost rate is 
determined from the annual amount of plant tailgate electricity and must 
be redetermined annually at the beginning of the same month of the year 
in which the powerplant was placed into service or, at the lessee's 
option, at a time concurrent with the beginning of the lessee's annual 
corporate accounting period; Provided, however, the period selected must 
coincide with the same period chosen for the transmission deduction 
pursuant to Sec. 206.353(b)(1). After a deduction period is chosen, the 
lessee may not later elect to use a different deduction period without 
MMS approval.
    (2) Allowable generating costs include operating and maintenance 
expenses, overhead, and either depreciation and a return on 
undepreciated capital investment in accordance with paragraph 
(b)(2)(iv)(A) of this section, or a cost equal to the capital investment 
in the powerplant multiplied by a rate of return in accordance with 
paragraph (b)(2)(iv)(B) of this section. Allowable capital costs are 
generally those costs for depreciable assets, including costs of 
delivery and installation of capital equipment, that are an integral 
part of the powerplant or are required by the design specifications of 
the power conversion cycle. A return on capital invested in the purchase 
of real estate for a powerplant site may be allowed provided that the 
lessee demonstrates the necessity for such purchase, the purchased land 
is not on a Federal geothermal lease, and MMS approves the deduction; 
the rate of return shall be the same rate determined in paragraph 
(b)(2)(v) of this section. The costs of gathering systems and other 
production-related facilities are not allowed.
    (i) Allowable operating expenses include operations supervision and 
engineering, operations labor, materials, ad valorem property taxes, 
rent, supplies, auxiliary fuel and/or utilities used to operate the 
powerplant during down time, and any other directly allocable and 
attributable operating expense that the lessee can document.
    (ii) Allowable maintenance expenses include maintenance of the 
powerplant, maintenance of equipment, maintenance labor, and other 
directly allocable and attributable maintenance expenses that the lessee 
can document.
    (iii) Overhead directly attributable and allocable to the operation 
and maintenance of the powerplant is an allowable expense. State and 
Federal income taxes and severance taxes, including royalties, are not 
allowable expenses.
    (iv) To compute costs associated with capital investment, a lessee 
may use either depreciation with a return on undepreciated capital 
investment, or a return on capital investment. After a lessee has 
elected to use either method, the lessee may not later elect to change 
to the other alternative without MMS approval.
    (A) To compute depreciation, the lessee must use a straight-line 
depreciation method based on the life of the geothermal project, usually 
the term of the electricity sales contract or other depreciation period 
acceptable to MMS. A change in ownership of a powerplant shall not alter 
the depreciation schedule established by the original lessee-owner for 
computing the generating costs. With or without a change in ownership, a 
powerplant shall be depreciated only once. The rate of return used to 
compute the return on undepreciated capital investment shall be 
determined pursuant to paragraph (b)(2)(v) of this section.
    (B) To compute a return on capital investment, the allowed cost 
shall be the amount equal to the allowable capital investment in the 
powerplant multiplied by the rate of return determined pursuant to 
paragraph (b)(2)(v) of this section. No allowance shall be provided for 
depreciation. This alternative shall apply only to powerplants first 
placed into service on or after March 1, 1988.
    (v) The rate of return shall be 2 times Standard and Poor's 
industrial BBB bond rate. The rate of return shall be 2 times the 
monthly average rate as published in Standard and Poor's Bond Guide for 
the first month of the annual deduction period and shall be effective 
during the following deduction period.

[[Page 104]]

The rate shall be redetermined annually at the beginning of the same 
month beginning the annual deduction period chosen pursuant to paragraph 
(b)(1) of this section.
    (3) Generating cost rates, determined annually, shall be computed by 
dividing the sum of the operating, maintenance, overhead, and capital 
costs by the annual amount of plant tailgate electricity.
    (4) For new powerplants, the lessee's generating costs for the first 
deduction period shall be based on estimated expenses (including 
overhead) for operating and maintaining the powerplant. For subsequent 
deduction periods, the generating costs shall be estimated based on the 
lessee's actual operating and maintenance expenses for the previous 
period adjusted for decreases or increases that the lessee knows will 
affect the deduction in the current period.
    (c) Under no circumstances shall the generating deduction plus the 
transmission deduction determined pursuant to Sec. 206.353 of this 
subpart reduce the royalty value of the geothermal resource to zero.
    (d)(1) If the actual generating deduction determined at the end of 
the annual reporting period is less than the amount the lessee estimated 
and used in the netback procedure during the reporting period, the 
lessee shall be required to pay additional royalties retroactive to the 
first month of the reporting period, plus interest computed pursuant to 
30 CFR 218.302. If the actual generating deduction is greater than the 
amount applied in the netback calculation, the lessee shall be entitled 
to a credit.
    (2) Lessees must submit corrected Forms MMS-2014 to reflect 
adjustments to royalty payments in accordance with MMS instructions.
    (e)(1) All generating deductions are subject to review, audit, and 
adjustment. When necessary or appropriate, MMS may direct a lessee to 
modify its estimated or actual generating deduction and adjust royalty 
values accordingly.
    (2) Pursuant to subpart H of 30 CFR part 212, the lessee must 
maintain all data and records supporting its generating deduction. These 
data and records must be made available to MMS and other authorized 
personnel upon request, and shall be maintained in a confidential manner 
in accordance with applicable laws and regulations pursuant to 
Sec. 206.352 of this subpart.
    (f) A one-time refund of royalties equal to the royalty amount of 
actual dismantlement costs attributable to the powerplant that are in 
excess of actual income attributable to the salvage of the powerplant 
will be allowed at the completion of the dismantlement and salvage 
operations.



Sec. 206.355  Valuation standards for direct utilization.

    (a) The value of geothermal resources produced for leases subject to 
this subpart and used in direct utilization processes shall be 
determined pursuant to this section.
    (b)(1)(i) The value of geothermal resources that are sold pursuant 
to an arm's-length contract shall be the gross proceeds accruing to the 
lessee, except as provided in paragraphs (b)(1)(ii) and (b)(1)(iii) of 
this section. The lessee shall have the burden of demonstrating that its 
contract is arm's-length. The value that the lessee reports for royalty 
purposes is subject to monitoring, review, and audit.
    (ii) In conducting these reviews and audits, MMS will examine 
whether or not the contract reflects the total consideration actually 
transferred either directly or indirectly from the buyer to the seller 
for the geothermal resource. If the contract does not reflect the total 
consideration, MMS may require that the geothermal resource sold 
pursuant to that contract be valued in accordance with paragraph (d) of 
this section. Value shall not be less than the gross proceeds accruing 
to the lessee, including any additional consideration received.
    (iii) If MMS determines that the gross proceeds accruing to the 
lessee pursuant to an arm's-length contract do not reflect the 
reasonable value of the geothermal resource because of misconduct by or 
between the contracting parties, or because the lessee otherwise has 
breached its duty to the lessor to market the production for the mutual 
benefit of the lessee and the

[[Page 105]]

lessor, MMS shall require the geothermal resource to be valued pursuant 
to paragraph (d) of this section and in accordance with the notification 
requirements of paragraph (e) of this section. When MMS determines that 
the value may be unreasonable, MMS will notify the lessee and give the 
lessee an opportunity to provide written information justifying the 
lessee's value.
    (2) The MMS may require a lessee to certify that its arm's-length 
contract provisions include all of the consideration to be paid by the 
buyer, either directly or indirectly, for the geothermal resource.
    (c)(1) The value of geothermal resources subject to this section 
that are sold under a non-arm's-length contract shall be determined in 
accordance with the first applicable of the following paragraphs:
    (i) The gross proceeds accruing to the lessee pursuant to a sale 
under its non-arm's-length contract provided that those gross proceeds 
are not less than the gross proceeds derived from or paid under the 
lowest-priced available comparable arm's-length contract for sales of 
geothermal resources to the lessee-affiliate's same direct utilization 
facility (the ``minimun value''). If the gross proceeds under the 
lessee's non-arm's-length contract are less than the ``minimum value'' 
under available comparable arm's-length contracts, or if there are no 
available comparable arm's-length contracts, value will be determined by 
the weighted average of the gross proceeds established under arm's-
length contracts for the sale of significant quantities of geothermal 
resources to the same direct utilization facility. Available contracts 
will mean contracts in the possession of the lessee, the lessee's 
affiliate, or MMS. In evaluating the comparability of arm's-length 
contracts for the purposes of these regulations, the following factors 
shall be considered: Time of execution, duration, terms, quality of the 
geothermal resource, volume, dedication to the same direct utilization 
facility, and other factors that may be appropriate to reflect the value 
of the resource;
    (ii) The equivalent value of the least expensive, reasonable 
alternative energy source (fuel). The equivalent value of the least 
expensive, reasonable alternative energy source shall be based on the 
amount of thermal energy that would otherwise be used by the direct 
utilization process in place of the geothermal resource. That amount of 
thermal energy (in Btu's) displaced by the geothermal resource shall be 
determined by the equation

thermal energy displaced =

                                                                        
          (hin - hout)  x  density  x  0.133681  x  volume              
---------------------------------------------------------------------  ,
                          efficiency factor                             
                                                                        

where hin is the enthalpy in Btu's/lb at the utilization 
facility inlet (based on measured inlet temperature), hout is 
the enthalpy in Btu's/lb at the facility outlet (based on measured 
outlet temperature), density is in lbs/cu ft based on inlet temperature, 
the factor 0.133681 (cu ft/gal) converts gallons to cubic feet, and 
volume is the quantity of geothermal fluid in gallons produced at the 
wellhead or measured at an approved point. The efficiency of the 
alternative energy source shall be 0.7 for coal and 0.8 for oil, natural 
gas, and other fuels derived from oil and natural gas, or an efficiency 
factor proposed by the lessee and approved by MMS. The methods of 
measuring resource parameters (temperature, volume, etc.) and the 
frequency of computing and accumulating the amount of thermal energy 
displaced shall be determined and approved by BLM; or
    (iii) A value determined by any other reasonable valuation method 
approved by MMS.
    (2) Valuations made pursuant to this paragraph are subject to the 
notification requirements of paragraph (e) of this section.
    (d)(1) The value of geothermal resources subject to this section 
that are not subject to a sales transaction but are instead used by the 
lessee in its own direct utilization facility (``no sales'' geothermal 
resources) shall be determined in accordance with the first applicable 
of the following paragraphs:
    (i) The weighted average of the gross proceeds established in arm's-
length contracts for the purchase of significant quantities of 
geothermal resources to operate the lessee's same direct utilization 
facility. In evaluating

[[Page 106]]

the acceptability of arm's-length contracts, the following factors shall 
be considered: Time of execution, duration, terms, volume, quality of 
resource, and such other factors as may be appropriate to reflect the 
value of the resource;
    (ii) The equivalent value of the least expensive, reasonable 
alternative energy source (fuel). The equivalent value of the least 
expensive, reasonable alternative energy source shall be based on the 
amount of thermal energy that would otherwise be used by the direct 
utilization process in place of the geothermal resource. That amount of 
thermal energy (in Btu's) displaced by the geothermal resource shall be 
determined by the equation

thermal energy displaced =

                                                                        
          (hin - hout)  x  density  x  0.133681  x  volume              
---------------------------------------------------------------------  ,
                          efficiency factor                             
                                                                        

where hin is the enthalpy in Btu's/lb at the utilization 
facility inlet (based on measured inlet temperature), hout is 
the enthalpy in Btu's/lb at the facility outlet (based on measured 
outlet temperature), density is in lbs/cu ft based on inlet temperature, 
the factor 0.133681 (cu ft/gal) converts gallons to cubic feet, and 
volume is the quantity of geothermal fluid in gallons produced at the 
wellhead or measured at an approved point. The efficiency of the 
alternative energy source shall be 0.7 for coal and 0.8 for oil, natural 
gas, and other fuels derived from oil and natural gas, or an efficiency 
factor proposed by the lessee and approved by MMS. The methods of 
measuring resource parameters (temperature, volume, etc.) and the 
frequency of computing and accumulating the amount of thermal energy 
displaced shall be determined and approved by BLM; or
    (iii) A value determined by any other reasonable valuation method 
approved by MMS.
    (2) Valuations made pursuant to this paragraph are subject to the 
notification requirements of paragraph (e) of this section.
    (e)(1) Pursuant to subpart H of 30 CFR part 212, the lessee shall 
retain all data relevant to the determination of royalty value, 
particularly where the value is determined pursuant to paragraph (c) or 
(d) of this section. Such data shall be subject to review and audit, and 
MMS will direct a lessee to use a different value if it determines that 
the reported value is inconsistent with the requirements of these 
regulations.
    (2) Upon request, lessees shall make available to authorized MMS 
representatives or to other authorized persons any and all contracts for 
the sale or other disposition of the lease production, and any arm's-
length sales and other data for like-quality production sold, purchased, 
or otherwise obtained by the lessee from the field as may be necessary 
to support a value determination.
    (3) A lessee shall notify MMS if it has determined value pursuant to 
paragraph (c) or (d) of this section. The notification shall be by 
letter to the MMS Associate Director for Royalty Management or his/her 
designee. The letter shall identify the valuation method to be used and 
contain a brief description of the procedure to be followed. The 
notification required by this paragraph is a one-time notification due 
no later than the end of the month following the month the lessee first 
reports royalties on a Form MMS-2014 using a valuation method authorized 
by paragraph (c) or (d) of this section.
    (f) If MMS determines that a lessee has not properly determined 
value, the lessee shall pay the difference, if any, between royalty 
payments made based upon the value it has used and the royalty payments 
that are due based upon the value established by MMS. The lessee shall 
also pay interest on that difference computed pursuant to 30 CFR 
218.302. If the lessee is entitled to a credit, MMS will provide 
instructions for the taking of that credit.
    (g) The lessee may request a value determination from MMS. In that 
event, the lessee shall propose to MMS a value determination method and 
may use that method in determining value, for royalty purposes, until 
MMS issues its decision. The lessee shall submit all available data 
relevant to its proposal. The MMS shall expeditiously determine the 
value based upon the lessee's proposal and any additional information 
MMS deems necessary. In making

[[Page 107]]

a value determination, MMS may use any of the valuation criteria 
consistent with this subpart. That determination shall remain effective 
for the period stated therein. After MMS issues its determination, the 
lessee shall make adjustments in accordance with paragraph (f) of this 
section.
    (h) Notwithstanding any other provision of this section, under no 
circumstances shall the value of production, for royalty purposes, be 
less than the gross proceeds accruing to the lessee where geothermal 
energy is directly sold.
    (i) The lessee is required to place geothermal resources in 
marketable condition and to deliver geothermal resources to the direct 
utilization facility at no cost to the Federal lessor. Where the value 
established pursuant to this section is determined by a lessee's gross 
proceeds, that value shall be increased to the extent that the gross 
proceeds have been reduced because the purchaser, or any other person, 
is providing certain services the cost of which ordinarily is the 
responsibility of the lessee to place the geothermal resource in 
marketable condition or to deliver it to the direct utilization 
facility.
    (j) Value shall be based on the highest price a prudent lessee can 
receive through legally enforceable claims under its contract. Absent 
contract revision or amendment, if the lessee fails to take proper or 
timely action to receive prices or benefits to which it is entitled, it 
must pay royalty at a value based upon that obtainable price or benefit. 
Contract revisions or amendments shall be in writing and signed by all 
parties to the contract. If the lessee makes timely application for a 
price increase or benefit allowed under its contract but the purchaser 
refuses and the lessee takes reasonable measures, which are documented, 
to force purchaser compliance, the lessee shall owe no additional 
royalties unless or until monies or consideration resulting from the 
price increase or additional benefits are received. This paragraph shall 
not be construed to permit a lessee to avoid its royalty payment 
obligation in situations where a purchaser fails to pay, in whole or in 
part or timely, for a quantity of geothermal resources.
    (k) Notwithstanding any provision in these regulations to the 
contrary, no review, reconciliation, monitoring, or other like process 
that results in a redetermination by MMS of value under this section 
shall be considered final or binding against the Federal Government or 
its beneficiaries until the audit period is formally closed.
    (l) Certain information submitted to MMS to support value 
determinations is exempted from disclosure by the Freedom of Information 
Act, 5 U.S.C. 552, or other Federal law. Any data specified by law to be 
privileged, confidential, or otherwise exempt will be maintained in a 
confidential manner in accordance with applicable laws and regulations. 
All requests for information about determinations made under this 
subpart are to be submitted in accordance with the Freedom of 
Information Act regulation of the Department, 43 CFR part 2.

[56 FR 57276, Nov. 8, 1991; 57 FR 12376, Apr. 9, 1992]



Sec. 206.356  Valuation standards for byproducts.

    (a) The value of geothermal byproducts, including commercially 
demineralized water, shall be determined pursuant to this section, less 
applicable byproducts transportation allowances determined pursuant to 
Secs. 206.357 and 206.358 of this subpart.
    (b)(1)(i) The value of byproducts that are sold pursuant to an 
arm's-length contract shall be the gross proceeds accruing to the 
lessee, except as provided in paragraphs (b)(1)(ii) and (b)(1)(iii) of 
this section. The lessee shall have the burden of demonstrating that its 
contract is arm's-length. The value that the lessee reports for royalty 
purposes is subject to monitoring, review, and audit.
    (ii) In conducting reviews and audits, MMS will examine whether the 
contract reflects the total consideration actually transferred, either 
directly or indirectly, from the buyer to the seller for the byproducts. 
If the contract does not reflect the total consideration, MMS may 
require that the byproducts sold pursuant to that contract be valued in 
accordance with paragraph (c) of this section. Value may not be less 
than the gross proceeds accruing to the

[[Page 108]]

lessee, including any additional consideration received .
    (iii) If MMS determines that the gross proceeds accruing to the 
lessee pursuant to an arm's-length contract do not reflect the 
reasonable value of the production because of misconduct by or between 
the contracting parties, or because the lessee otherwise has breached 
its duty to the lessor to market the production for the mutual benefit 
of the lessee and the lessor, MMS shall require that the byproduct 
production be valued pursuant to paragraph (c) of this section and in 
accordance with the notification requirements of paragraph (d) of this 
section. If MMS determines that the value may be unreasonable, MMS will 
notify the lessee and give the lessee an opportunity to provide written 
information justifying the lessee's reported byproduct value.
    (2) The MMS may require a lessee to certify that the provisions in 
its arm's-length contract include all of the consideration to be paid by 
the buyer, either directly or indirectly, for the byproduct.
    (c) The value of byproducts that are sold pursuant to a non-arm's-
length contract or that are utilized by the lessee (no sales), except 
demineralized water used for the benefit of the lease pursuant to 
paragraph (b)(2) of Sec. 202.351 of this subpart, shall be determined in 
accordance with the first applicable of the following paragraphs:
    (1) The gross proceeds accruing to the lessee pursuant to a sale 
under its non arm's-length contract (or other disposition by other than 
an arm's-length contract), provided that those gross proceeds are not 
less than the gross proceeds derived from or paid under the lowest-
priced available comparable arm's-length contract for sales, purchases, 
or other dispositions of like-quality byproducts in the field or, if 
necessary to obtain a representative sample, from the same area (the 
``minimum value''). If the gross proceeds under the lessee's non-arm's-
length contract are less than the ``minimum value'' under available 
comparable arms length contracts, or if there are no available 
comparable arm's-length contracts, value will be determined by the 
weighted average of the gross proceeds established under arm's-length 
contracts for the sale of like-quality products in the field or, if 
necessary to obtain a representative sample, from the same area. 
Available contracts will mean contracts in the possession of the lessee, 
the lessee's affiliate, or MMS. In evaluating the comparability of 
arm's-length contracts for the purposes of these regulations, the 
following factors shall be considered: Field or area, price, time of 
execution, duration, terms, quality of the byproduct, volume, market or 
markets served, and other factors that may be appropriate to reflect the 
value of the byproduct;
    (2) Other relevant matters including, but not limited to, published 
or publicly available spot-market prices, or information submitted by 
the lessee concerning circumstances unique to a particular lease 
operation or the saleability of certain byproducts; or
    (3) A netback method or any other reasonable method used to 
determine value.
    (d)(1) Pursuant to subpart H of 30 CFR part 212, the lessee shall 
retain all data relevant to the determination of royalty value, 
particularly where the value is determined pursuant to paragraph (c) of 
this section. Such data shall be subject to review and audit, and MMS 
will direct a lessee to use a different value if it determines that the 
reported value is inconsistent with the requirements of these 
regulations.
    (2) Upon request, lessees shall make available to authorized MMS 
representatives or to other authorized persons any and all contracts 
and/or invoices for the sale or other disposition of the byproducts, and 
any arm's-length sales and other data for like-quality production sold, 
purchased, or otherwise obtained by the lessee from the field or other 
area as may be necessary to support a value determination.
    (3) A lessee shall notify MMS if it has determined value pursuant to 
paragraph (c) of this section. The notification shall be by letter to 
the MMS Associate Director for Royalty Management or his/her designee. 
The letter shall identify the valuation method to be used and contain a 
brief description of the procedure to be followed. The notification 
required by this paragraph is

[[Page 109]]

a one-time notification due no later than the end of the month following 
the month the lessee first reports royalties on a Form MMS-2014 using a 
valuation method authorized by paragraph (c) of this section, and each 
time there is a change in a method under paragraph (c) of this section.
    (e) If MMS determines that a lessee has not properly determined 
value, the lessee shall pay the difference, if any, between royalty 
payments made based upon the value it has used and the royalty payments 
that are due based upon the value established by MMS. The lessee shall 
also pay interest on that difference computed pursuant to 30 CFR 
218.302. If the lessee is entitled to a credit, MMS will provide 
instructions for the taking of that credit.
    (f) The lessee may request a value determination from MMS. In that 
event, the lessee shall propose to MMS a value determination method and 
may use that method in determining value, for royalty purposes, until 
MMS issues its decision. The lessee shall submit all available data 
relevant to its proposal. The MMS shall expeditiously determine the 
value based upon the lessee's proposal and any additional information 
MMS deems necessary. In making a value determination, MMS may use any of 
the valuation criteria consistent with this subpart. That determination 
shall remain effective for the period stated therein. After MMS issues 
its determination, the lessee shall make the adjustments in accordance 
with paragraph (e) of this section.
    (g) Notwithstanding any other provisions of the section, under no 
circumstances shall the value of byproducts for royalty purposes be less 
than the gross proceeds accruing to the lessee, less applicable 
byproduct transportation allowances determined pursuant to Secs. 206.357 
and 206.358 of this subpart.
    (h) The lessee is required to place the byproducts in marketable 
condition at no cost to the Federal Government. Where the value 
established pursuant to this section is determined by a lessee's gross 
proceeds, that value shall be increased to the extent that the gross 
proceeds have been reduced because the purchaser, or any other person, 
is providing certain services the cost of which ordinarily is the 
responsibility of the lessee to place the byproducts in marketable 
condition.
    (i) Value shall be based on the highest price a prudent lessee can 
receive through legally enforceable claims under its contract. Absent 
contract revision or amendment, if the lessee fails to take proper or 
timely action to receive prices or benefits to which it is entitled, it 
must pay royalty at a value based upon that obtainable price or benefit. 
Contract revisions or amendments shall be in writing and signed by all 
parties to the contract, and may be retroactively applied to value 
byproducts, for royalty purposes, for a period not to exceed 2 years, 
unless MMS approves a longer period. If the lessee makes timely 
application for a price increase allowed under its contract but the 
purchaser refuses and the lessee takes reasonable measures, which are 
documented, to force purchaser compliance, the lessee will owe no 
additional royalties unless or until monies or consideration resulting 
from the price increase are received. This paragraph shall not be 
construed to permit a lessee to avoid its royalty payment obligation in 
situations where a purchaser fails to pay, in whole or in part or 
timely, for a quantity of byproducts.
    (j) Notwithstanding any provision in these regulations to the 
contrary, no review, reconciliation, monitoring, or other like process 
that results in a redetermination by MMS of value under this section 
shall be considered final or binding against the Federal Government or 
its beneficiaries until the audit period is formally closed.
    (k) Certain information submitted to MMS to support valuation 
proposals, including byproduct transportation allowances pursuant to 
Secs. 206.357 and 206.358 of this subpart, is exempted from disclosure 
by the Freedom of Information Act, 5 U.S.C. 552. Any data specified by 
the act to be privileged, confidential, or otherwise exempt shall be 
maintained in a confidential manner in accordance with applicable laws 
and regulations. All requests for information about determinations made 
under this subpart are to be submitted in accordance with the Freedom of 
Information Act regulation of the Department, 43 CFR part 2.

[[Page 110]]



Sec. 206.357  Byproduct transportation allowances--general.

    (a) Where the value of byproducts has been determined at a point off 
the geothermal lease, unit, or participating area, MMS shall allow a 
deduction in determining value, for royalty purposes, for the lessee's 
reasonable, actual costs incurred to:
    (1) Transport the byproducts from a Federal lease, unit, or 
participating area to a sales point or point of delivery that is off the 
lease, unit, or participating area; or
    (2) Transport the byproducts from a Federal lease, unit, or 
participating area, or from a geothermal utilization facility to a 
byproduct recovery facility when that byproduct recovery facility is off 
the lease, unit, or participating area and, if applicable, from the 
recovery facility to a sales point or point of delivery off the lease, 
unit, or participating area. Costs for transporting geothermal fluids 
from the lease to the geothermal utilization facility, whether on or off 
the lease, shall not be included in the transportation allowance.
    (b) Under no circumstances shall the byproduct transportation 
allowance authorized by paragraph (a) of this section reduce the value 
of the byproducts under any selling arrangement to zero.
    (c)(1) When byproducts are transported from a lease, unit, 
participating area, or geothermal utilization facility to a byproduct 
recovery facility, the lessee is not required to allocate transportation 
costs between the quantity of marketable byproducts and the rejected 
waste material. The byproduct transportation allowance shall be 
authorized for the total production that is transported. Byproduct 
transportation allowances shall be expressed as a cost per unit of 
marketable byproducts transported.
    (2) For byproducts that are extracted on the lease, unit, or 
participating area, or at the geothermal utilization facility, the 
byproduct transportation allowance shall be authorized for the total 
production that is transported to a point of sale off the lease, unit, 
or participating area. Byproduct transportation allowances shall be 
expressed as a cost per unit of byproduct transported.
    (3) Transportation costs shall be authorized as allowances only when 
the transported byproduct is sold, delivered, or otherwise utilized by 
the lessee and royalties are reported and paid.
    (d) Byproduct transportation allowances are subject to monitoring, 
review, and audit. If, after a review and/or audit, MMS determines that 
a lessee has improperly determined a byproduct transportation allowance 
authorized by this section, then the lessee shall pay any additional 
royalties plus interest determined in accordance with 30 CFR 218.302, or 
shall be entitled to a credit without interest.
    (e) If byproducts produced from Federal and non-Federal leases are 
commingled for transportation, lessees shall not disproportionately 
allocate transportation costs to Federal lease production.
    (f) Upon request, the lessee shall make available to authorized MMS 
representatives or to other authorized persons all transportation 
contracts and all other information as may be necessary to support a 
byproduct transportation allowance.
    (g) Byproduct transportation allowances are to be reported as 
separate lines on Form MMS-2014.



Sec. 206.358   Determination of byproduct transportation allowances.

    (a) Arm's-length contracts. (1) For transportation costs incurred by 
a lessee pursuant to an arm's-length contract, the transportation 
allowance shall be the reasonable, actual costs incurred by the lessee 
for transporting the byproducts under that contract, subject to 
monitoring, review, audit, and possible future adjustments. The MMS's 
prior approval is not required before a lessee may deduct costs incurred 
under an arm's-length transportation contract.
    (2) In conducting reviews and audits, MMS will examine whether the 
contract reflects more than the consideration actually transferred 
either directly or indirectly from the lessee to the transporter for the 
transportation. If the contract reflects more than the

[[Page 111]]

total consideration paid, MMS may require that the byproduct 
transportation allowance be determined in accordance with paragraph (b) 
of this section.
    (3) If MMS determines that the consideration paid pursuant to an 
arm's-length byproduct transportation contract does not reflect the 
reasonable value of the transportation because of misconduct by or 
between the contracting parties, or because the lessee otherwise has 
breached its duty to the lessor to market the production for the mutual 
benefit of the lessee and the lessor, MMS shall require that the 
byproduct transportation allowance be determined in accordance with 
paragraph (b) of this section. When MMS determines that the value of the 
transportation may be unreasonable, MMS will notify the lessee and give 
the lessee an opportunity to provide written information justifying the 
lessee's transportation costs.
    (4) Where the lessee's payments for transportation under an arm's-
length contract are not established on a dollars-per-unit basis, the 
lessee shall convert whatever consideration is paid to a dollar value 
equivalent for the purposes of this section.
    (b) Non-arm's-length or no contract. (1) If a lessee has a non-
arm's-length transportation contract or has no contract, including those 
situations where the lessee performs transportation services for itself, 
the byproduct transportation allowance shall be based upon the lessee's 
reasonable actual costs. All byproduct transportation allowances 
deducted under a non-arm's-length or no-contract situation are subject 
to monitoring, review, audit, and possible future adjustment. Prior MMS 
approval of byproduct transportation allowances is not required for non-
arm's-length or no-contract situations.
    (2) The byproduct transportation allowance for non-arm's-length or 
no-contract situations shall be based upon the lessee's actual costs for 
transportation during the reporting period, including operating and 
maintenance expenses, overhead, and either depreciation and a return on 
undepreciated capital investment in accordance with paragraph 
(b)(2)(iv)(A) of this section, or a cost equal to the capital investment 
in the transportation system multiplied by the rate of return in 
accordance with paragraph (b)(2)(iv)(B) of this section. Allowable 
capital costs are generally those for depreciable assets, including 
costs of delivery and installation of capital equipment, that are an 
integral part of the transportation system. A return on capital invested 
in the purchase of real estate to locate the byproduct transportation 
facilities may be allowed provided that the lessee demonstrates the 
necessity for such purchase, the purchased land is not on a Federal 
geothermal lease, and MMS approves the deduction; the rate of return 
shall be the same rate determined in paragraph (b)(2)(v) of this 
section.
    (i) Allowable operating expenses include operations supervision and 
engineering, operations labor, fuel, utilities, materials, ad valorem 
property taxes, rent, supplies, and any other allocable and attributable 
operating expenses that the lessee can document.
    (ii) Allowable maintenance expenses include maintenance of the 
transportation system, maintenance of equipment, maintenance labor, and 
other directly allocable and attributable maintenance expenses that the 
lessee can document.
    (iii) Overhead attributable and allocable to the operation and 
maintenance of the transportation system is an allowable expense. State 
and Federal income taxes and severance taxes and other fees, including 
royalties, are not allowable expenses.
    (iv) To compute costs associated with capital investment, a lessee 
may use either paragraph (b)(2)(iv)(A) or (b)(2)(iv)(B) of this section. 
After a lessee has elected to use either method for a transportation 
system, the lessee may not later elect to change to the other 
alternative without MMS approval.
    (A) To compute depreciation, the lessee must use a straight-line 
depreciation method based on, as appropriate, either the life of 
equipment or the life of the geothermal project that the transportation 
system services. After an election is made, the lessee may not change 
methods. A change in ownership of a transportation system shall

[[Page 112]]

not alter the depreciation schedule established by the original 
transporter/lessee for purposes of the allowance calculation. With or 
without a change in ownership, a transportation system shall be 
depreciated only once. Equipment shall not be depreciated below a 
reasonable salvage value. The rate of return used to compute the return 
on undepreciated capital investment shall be determined pursuant to 
paragraph (b)(2)(v) of this section.
    (B) To compute a return on capital investment, the allowed cost 
shall be the amount equal to the allowable capital investment in the 
transportation system multiplied by the rate of return determined 
pursuant to paragraph (b)(2)(v) of this section. No allowance shall be 
provided for depreciation.
    (v) The rate of return shall be Standard and Poor's industrial BBB 
bond rate. The rate of return shall be the monthly average rate as 
published in Standard and Poor's Bond Guide for the first month of the 
annual reporting period for which the allowance is applicable and shall 
be effective during the reporting period. The rate shall be redetermined 
at the beginning of each subsequent transportation allowance reporting 
period.



                    Subpart I--OCS Sulfur [Reserved]



                         Subpart J--Indian Coal

    Source:  61 FR 5481, Feb. 12, 1996, unless otherwise noted.



Sec. 206.450  Purpose and scope.

    (a) This subpart prescribes the procedures to establish the value, 
for royalty purposes, of all coal from Indian Tribal and allotted leases 
(except leases on the Osage Indian Reservation, Osage County, Oklahoma).
    (b) If the specific provisions of any statute, treaty, or settlement 
agreement between the Indian lessor and a lessee resulting from 
administrative or judicial litigation, or any coal lease subject to the 
requirements of this subpart, are inconsistent with any regulation in 
this subpart, then the statute, treaty, lease provision, or settlement 
shall govern to the extent of that inconsistency.
    (c) All royalty payments are subject to later audit and adjustment.
    (d) The regulations in this subpart are intended to ensure that the 
trust responsibilities of the United States with respect to the 
administration of Indian coal leases are discharged in accordance with 
the requirements of the governing mineral leasing laws, treaties, and 
lease terms.



Sec. 206.451  Definitions.

    Ad valorem lease means a lease where the royalty due to the lessor 
is based upon a percentage of the amount or value of the coal.
    Allowance means an approved, or an MMS-initially accepted deduction 
in determining value for royalty purposes. Coal washing allowance means 
an allowance for the reasonable, actual costs incurred by the lessee for 
coal washing, or an approved or MMS-initially accepted deduction for the 
costs of washing coal, determined pursuant to this subpart. 
Transportation allowance means an allowance for the reasonable, actual 
costs incurred by the lessee for moving coal to a point of sale or point 
of delivery remote from both the lease and mine or wash plant, or an 
approved MMS-initially accepted deduction for costs of such 
transportation, determined pursuant to this subpart.
    Area means a geographic region in which coal has similar quality and 
economic characteristics. Area boundaries are not officially designated 
and the areas are not necessarily named.
    Arm's-length contract means a contract or agreement that has been 
arrived at in the marketplace between independent, nonaffiliated persons 
with opposing economic interests regarding that contract. For purposes 
of this subpart, two persons are affiliated if one person controls, is 
controlled by, or is under common control with another person. For 
purposes of this subpart, based on the instruments of ownership of the 
voting securities of an entity, or based on other forms of ownership: 
ownership in excess of 50 percent constitutes control; ownership of 10 
through 50 percent creates a presumption of control; and ownership of 
less than 10 percent creates a presumption of noncontrol which MMS may 
rebut if

[[Page 113]]

it demonstrates actual or legal control, including the existence of 
interlocking directorates. Notwithstanding any other provisions of this 
subpart, contracts between relatives, either by blood or by marriage, 
are not arm's-length contracts. MMS may require the lessee to certify 
ownership control. To be considered arm's-length for any production 
month, a contract must meet the requirements of this definition for that 
production month, as well as when the contract was executed.
    Audit means a review, conducted in accordance with generally 
accepted accounting and auditing standards, of royalty payment 
compliance activities of lessees or other interest holders who pay 
royalties, rents, or bonuses on Indian leases.
    BIA means the Bureau of Indian Affairs of the Department of the 
Interior.
    BLM means the Bureau of Land Management of the Department of the 
Interior.
    Coal means coal of all ranks from lignite through anthracite.
    Coal washing means any treatment to remove impurities from coal. 
Coal washing may include, but is not limited to, operations such as 
flotation, air, water, or heavy media separation; drying; and related 
handling (or combination thereof).
    Contract means any oral or written agreement, including amendments 
or revisions thereto, between two or more persons and enforceable by law 
that with due consideration creates an obligation.
    Gross proceeds (for royalty payment purposes) means the total monies 
and other consideration accruing to a coal lessee for the production and 
disposition of the coal produced. Gross proceeds includes, but is not 
limited to, payments to the lessee for certain services such as 
crushing, sizing, screening, storing, mixing, loading, treatment with 
substances including chemicals or oils, and other preparation of the 
coal to the extent that the lessee is obligated to perform them at no 
cost to the Indian lessor. Gross proceeds, as applied to coal, also 
includes but is not limited to reimbursements for royalties, taxes or 
fees, and other reimbursements. Tax reimbursements are part of the gross 
proceeds accruing to a lessee even though the Indian royalty interest 
may be exempt from taxation. Monies and other consideration, including 
the forms of consideration identified in this paragraph, to which a 
lessee is contractually or legally entitled but which it does not seek 
to collect through reasonable efforts are also part of gross proceeds.
    Indian allottee means any Indian for whom land or an interest in 
land is held in trust by the United States or who holds title subject to 
Federal restriction against alienation.
    Indian Tribe means any Indian Tribe, band, nation, pueblo, 
community, rancheria, colony, or other group of Indians for which any 
land or interest in land is held in trust by the United States or which 
is subject to Federal restriction against alienation.
    Lease means any contract, profit-share arrangement, joint venture, 
or other agreement issued or approved by the United States for an Indian 
coal resource under a mineral leasing law that authorizes exploration 
for, development or extraction of, or removal of coal--or the land 
covered by that authorization, whichever is required by the context.
    Lessee means any person to whom the Indian Tribe or an Indian 
allottee issues a lease, and any person who has been assigned an 
obligation to make royalty or other payments required by the lease. This 
includes any person who has an interest in a lease as well as an 
operator or payor who has no interest in the lease but who has assumed 
the royalty payment responsibility.
    Like-quality coal means coal has similar chemical and physical 
characteristics.
    Marketable condition means coal that is sufficiently free from 
impurities and otherwise in a condition that it will be accepted by a 
purchaser under a sales contract typical for that area.
    Mine means an underground or surface excavation or series of 
excavations and the surface or underground support facilities that 
contribute directly or indirectly to mining, production, preparation, 
and handling of lease products.
    MMS means the Minerals Management Service of the Department of the 
Interior.

[[Page 114]]

    Net-back method means a method for calculating market value of coal 
at the lease or mine. Under this method, costs of transportation, 
washing, handling, etc., are deducted from the ultimate proceeds 
received for the coal at the first point at which reasonable values for 
the coal may be determined by a sale pursuant to an arm's-length 
contract or by comparison to other sales of coal, to ascertain value at 
the mine.
    Net output means the quantity of washed coal that a washing plant 
produces.
    Person means by individual, firm, corporation, association, 
partnership, consortium, or joint venture.
    Selling arrangement means the individual contractual arrangements 
under which sales or dispositions of coal are made to a purchaser.
    Spot market price means the price received under any sales 
transaction when planned or actual deliveries span a short period of 
time, usually not exceeding one year.



Sec. 206.452  Coal subject to royalties--general provisions.

    (a) All coal (except coal unavoidably lost as determined by BLM 
pursuant to 43 CFR group 3400) from an Indian lease subject to this part 
is subject to royalty. This includes coal used, sold, or otherwise 
disposed of by the lessee on or off the lease.
    (b) If a lessee receives compensation for unavoidably lost coal 
through insurance coverage or other arrangements, royalties at the rate 
specified in the lease are to be paid on the amount of compensation 
received for the coal. No royalty is due on insurance compensation 
received by the lessee for other losses.
    (c) If waste piles or slurry ponds are reworked to recover coal, the 
lessee shall pay royalty at the rate specified in the lease at the time 
the recovered coal is used, sold, or otherwise finally disposed of. The 
royalty rate shall be that rate applicable to the production method used 
to initially mine coal in the waste pile or slurry pond; i.e., 
underground mining method or surface mining method. Coal in waste pits 
or slurry ponds initially mined from Indian leases shall be allocated to 
such leases regardless of whether it is stored on Indian lands. The 
lessee shall maintain accurate records to determine to which individual 
Indian lease coal in the waste pit or slurry pond should be allocated. 
However, nothing in this section requires payment of a royalty on coal 
for which a royalty has already been paid.



Sec. 206.453  Quality and quantity measurement standards for reporting and paying royalties.

    (a) For leases subject to Sec. 206.456 of this subpart, the quality 
of coal on which royalty is due shall be reported on the basis of 
percent sulfur, percent ash, and number of British thermal units (Btu) 
per pound of coal. Coal quality determinations shall be made at 
intervals prescribed in the lessee's sales contract. If there is no 
contract, or if the contract does not specify the intervals of coal 
quality determination, the lessee shall propose a quality test schedule 
to MMS. In no case, however, shall quality tests be performed less than 
quarterly using standard industry-recognized testing methods. Coal 
quality information shall be reported on the appropriate forms required 
under 30 CFR part 216.
    (b) For all leases subject to this subpart, the quantity of coal on 
which royalty is due shall be measured in short tons (of 2,000 pounds 
each) by methods prescribed by the BLM. Coal quantity information shall 
be reported on appropriate forms required under 30 CFR part 216 and on 
the Report of Sales and Royalty Remittance, Form MMS-2014, as required 
under 30 CFR part 210.



Sec. 206.454  Point of royalty determination.

    (a) For all leases subject to this subpart, royalty shall be 
computed on the basis of the quantity and quality of Indian coal in 
marketable condition measured at the point of royalty measurement as 
determined jointly by BLM and MMS.
    (b) Coal produced and added to stockpiles or inventory does not 
require payment of royalty until such coal is later used, sold, or 
otherwise finally disposed of. MMS may ask BLM or BIA to increase the 
lease bond to protect the lessor's interest when BLM determines

[[Page 115]]

that stockpiles or inventory become excessive so as to increase the risk 
of degradation of the resource.
    (c) The lessee shall pay royalty at a rate specified in the lease at 
the time the coal is used, sold, or otherwise finally disposed of, 
unless otherwise provided for at Sec. 206.455(d) of this subpart.



Sec. 206.455  Valuation standards for cents-per-ton leases.

    (a) This section is applicable to coal leases on Indian Tribal and 
allotted Indian lands (except leases on the Osage Indian Reservation, 
Osage County, Oklahoma) which provide for the determination of royalty 
on a cents-per-ton (or other quantity) basis.
    (b) The royalty for coal from leases subject to this section shall 
be based on the dollar rate per ton prescribed in the lease. That dollar 
rate shall be applicable to the actual quantity of coal used, sold, or 
otherwise finally disposed of, including coal which is avoidably lost as 
determined by BLM pursuant to 43 CFR part 3400.
    (c) For leases subject to this section, there shall be no allowances 
for transportation, removal of impurities, coal washing, or any other 
processing or preparation of the coal.
    (d) When a coal lease is readjusted pursuant to 43 CFR part 3400 and 
the royalty valuation method changes from a cents-per-ton basis to an ad 
valorem basis, coal which is produced prior to the effective date of 
readjustment and sold or used within 30 days of the effective date of 
readjustment shall be valued pursuant to this section. All coal that is 
not used, sold, or otherwise finally disposed of within 30 days after 
the effective date of readjustment shall be valued pursuant to the 
provisions of Sec. 206.456 of this subpart, and royalties shall be paid 
at the royalty rate specified in the readjusted lease.



Sec. 206.456  Valuation standards for ad valorem leases.

    (a) This section is applicable to coal leases on Indian Tribal and 
allotted Indian lands (except leases on the Osage Indian Reservation, 
Osage County, Oklahoma) which provide for the determination of royalty 
as a percentage of the amount of value of coal (ad valorem). The value 
for royalty purposes of coal from such leases shall be the value of coal 
determined pursuant to this section, less applicable coal washing 
allowances and transportation allowances determined pursuant to 
Secs. 206.457 through 206.461 of this subpart, or any allowance 
authorized by Sec. 206.464 of this subpart. The royalty due shall be 
equal to the value for royalty purposes multiplied by the royalty rate 
in the lease.
    (b)(1) The value of coal that is sold pursuant to an arm's-length 
contract shall be the gross proceeds accruing to the lessee, except as 
provided in paragraphs (b)(2), (b)(3), and (b)(5) of this section. The 
lessee shall have the burden of demonstrating that its contract is 
arm's-length. The value which the lessee reports, for royalty purposes, 
is subject to monitoring, review, and audit.
    (2) In conducting reviews and audits, MMS will examine whether the 
contract reflects the total consideration actually transferred either 
directly or indirectly from the buyer to the seller for the coal 
produced. If the contract does not reflect the total consideration, then 
MMS may require that the coal sold pursuant to that contract be valued 
in accordance with paragraph (c) of this section. Value may not be based 
on less than the gross proceeds accruing to the lessee for the coal 
production, including the additional consideration.
    (3) If MMS determines that the gross proceeds accruing to the lessee 
pursuant to an arm's-length contract do not reflect the reasonable value 
of the production because of misconduct by or between the contracting 
parties, or because the lessee otherwise has breached its duty to the 
lessor to market the production for the mutual benefit of the lessee and 
the lessor, then MMS shall require that the coal production be valued 
pursuant to paragraphs (c)(2)(ii), (c)(2)(iii), (c)(2)(iv), or (c)(2)(v) 
of this section, and in accordance with the notification requirements of 
paragraph (d)(3) of this section. When MMS determines that the value may 
be unreasonable, MMS will notify the lessee and give the lessee an 
opportunity to provide written information justifying the lessee's 
reported coal value.

[[Page 116]]

    (4) MMS may require a lessee to certify that its arm's-length 
contract provisions include all of the consideration to be paid by the 
buyer, either directly or indirectly, for the coal production.
    (5) The value of production for royalty purposes shall not include 
payments received by the lessee pursuant to a contract which the lessee 
demonstrates, to MMS' satisfaction, were not part of the total 
consideration paid for the purchase of coal production.
    (c)(1) The value of coal from leases subject to this section and 
which is not sold pursuant to an arm's-length contract shall be 
determined in accordance with this section.
    (2) If the value of the coal cannot be determined pursuant to 
paragraph (b) of this section, then the value shall be determined 
through application of other valuation criteria. The criteria shall be 
considered in the following order, and the value shall be based upon the 
first applicable criterion:
    (i) The gross proceeds accruing to the lessee pursuant to a sale 
under its non-arm's-length contract (or other disposition of produced 
coal by other than an arm's-length contract), provided that those gross 
proceeds are within the range of the gross proceeds derived from, or 
paid under, comparable arm's-length contracts between buyers and sellers 
neither of whom is affiliated with the lessee for sales, purchases, or 
other dispositions of like-quality coal produced in the area. In 
evaluating the comparability of arm's-length contracts for the purposes 
of these regulations, the following factors shall be considered: price, 
time of execution, duration, market or markets served, terms, quality of 
coal, quantity, and such other factors as may be appropriate to reflect 
the value of the coal;
    (ii) Prices reported for that coal to a public utility commission;
    (iii) Prices reported for that coal to the Energy Information 
Administration of the Department of Energy;
    (iv) Other relevant matters including, but not limited to, published 
or publicly available spot market prices, or information submitted by 
the lessee concerning circumstances unique to a particular lease 
operation or the salability of certain types of coal;
    (v) If a reasonable value cannot be determined using paragraphs 
(c)(2)(i), (c)(2)(ii), (c)(2)(iii), or (c)(2)(iv) of this section, then 
a net-back method or any other reasonable method shall be used to 
determine value.
    (3) When the value of coal is determined pursuant to paragraph 
(c)(2) of this section, that value determination shall be consistent 
with the provisions contained in paragraph (b)(5) of this section.
    (d)(1) Where the value is determined pursuant to paragraph (c) of 
this section, that value does not require MMS' prior approval. However, 
the lessee shall retain all data relevant to the determination of 
royalty value. Such data shall be subject to review and audit, and MMS 
will direct a lessee to use a different value if it determines that the 
reported value is inconsistent with the requirements of these 
regulations.
    (2) An Indian lessee will make available upon request to the 
authorized MMS or Indian representatives, or to the Inspector General of 
the Department of the Interior or other persons authorized to receive 
such information, arm's-length sales and sales quantity data for like-
quality coal sold, purchased, or otherwise obtained by the lessee from 
the area.
    (3) A lessee shall notify MMS if it has determined value pursuant to 
paragraphs (c)(2)(ii), (c)(2)(iii), (c)(2)(iv), or (c)(2)(v) of this 
section. The notification shall be by letter to the Associate Director 
for Royalty Management or his/her designee. The letter shall identify 
the valuation method to be used and contain a brief description of the 
procedure to be followed. The notification required by this section is a 
one-time notification due no later than the month the lessee first 
reports royalties on the Form MMS-2014 using a valuation method 
authorized by paragraphs (c)(2)(ii), (c)(2)(iii), (c)(2)(iv), or 
(c)(2)(v) of this section, and each time there is a change in a method 
under paragraphs (c)(2)(iv) or (c)(2)(v) of this section.
    (e) If MMS determines that a lessee has not properly determined 
value, the lessee shall be liable for the difference, if any, between 
royalty payments made based upon the value it has used and the royalty 
payments that are due

[[Page 117]]

based upon the value established by MMS. The lessee shall also be liable 
for interest computed pursuant to 30 CFR 218.202. If the lessee is 
entitled to a credit, MMS will provide instructions for the taking of 
that credit.
    (f) The lessee may request a value determination from MMS. In that 
event, the lessee shall propose to MMS a value determination method, and 
may use that method in determining value for royalty purposes until MMS 
issues its decision. The lessee shall submit all available data relevant 
to its proposal. MMS shall expeditiously determine the value based upon 
the lessee's proposal and any additional information MMS deems 
necessary. That determination shall remain effective for the period 
stated therein. After MMS issues its determination, the lessee shall 
make the adjustments in accordance with paragraph (e) of this section.
    (g) Notwithstanding any other provisions of this section, under no 
circumstances shall the value for royalty purposes be less than the 
gross proceeds accruing to the lessee for the disposition of produced 
coal less applicable provisions of paragraph (b)(5) of this section and 
less applicable allowances determined pursuant to Secs. 206.457 through 
206.461 and Sec. 206.464 of this subpart.
    (h) The lessee is required to place coal in marketable condition at 
no cost to the Indian lessor. Where the value established pursuant to 
this section is determined by a lessee's gross proceeds, that value 
shall be increased to the extent that the gross proceeds has been 
reduced because the purchaser, or any other person, is providing certain 
services, the cost of which ordinarily is the responsibility of the 
lessee to place the coal in marketable condition.
    (i) Value shall be based on the highest price a prudent lessee can 
receive through legally enforceable claims under its contract. Absent 
contract revision or amendment, if the lessee fails to take proper or 
timely action to receive prices or benefits to which it is entitled, it 
must pay royalty at a value based upon that obtainable price or benefit. 
Contract revisions or amendments shall be in writing and signed by all 
parties to an arm's-length contract, and may be retroactively applied to 
value for royalty purposes for a period not to exceed two years, unless 
MMS approves a longer period. If the lessee makes timely application for 
a price increase allowed under its contract but the purchaser refuses, 
and the lessee takes reasonable measures, which are documented, to force 
purchaser compliance, the lessee will owe no additional royalties unless 
or until monies or consideration resulting from the price increase are 
received. This paragraph shall not be construed to permit a lessee to 
avoid its royalty payment obligation in situations where a purchaser 
fails to pay, in whole or in part or timely, for a quantity of coal.
    (j) Notwithstanding any provision in these regulations to the 
contrary, no review, reconciliation, monitoring, or other like process 
that results in a redetermination by MMS of value under this section 
shall be considered final or binding as against the Indian Tribes or 
allottees until the audit period is formally closed.
    (k) Certain information submitted to MMS to support valuation 
proposals, including transportation, coal washing, or other allowances 
pursuant to Secs. 206.457 through 206.461 and Sec. 206.464 of this 
subpart, is exempted from disclosure by the Freedom of Information Act, 
5 U.S.C. 522. Any data specified by the Act to be privileged, 
confidential, or otherwise exempt shall be maintained in a confidential 
manner in accordance with applicable law and regulations. All requests 
for information about determinations made under this part are to be 
submitted in accordance with the Freedom of Information Act regulation 
of the Department of the Interior, 43 CFR part 2. Nothing in this 
section is intended to limit or diminish in any manner whatsoever the 
right of an Indian lessor to obtain any and all information as such 
lessor may be lawfully entitled from MMS or such lessor's lessee 
directly under the terms of the lease or applicable law.



Sec. 206.457  Washing allowances--general.

    (a) For ad valorem leases subject to Sec. 206.456 of this subpart, 
MMS shall, as authorized by this section, allow a deduction in 
determining value for royalty purposes for the reasonable, actual

[[Page 118]]

costs incurred to wash coal, unless the value determined pursuant to 
Sec. 206.456 of this subpart was based upon like-quality unwashed coal. 
Under no circumstances shall the washing allowance and the 
transportation allowance authorized by Sec. 206.461 of this subpart 
reduce the value for royalty purposes to zero.
    (b) If MMS determines that a lessee has improperly determined a 
washing allowance authorized by this section, then the lessee shall be 
liable for any additional royalties, plus interest determined in 
accordance with 30 CFR 218.202, or shall be entitled to a credit, 
without interest.
    (c) Lessees shall not disproportionately allocate washing costs to 
Indian leases.
    (d) No cost normally associated with mining operations and which are 
necessary for placing coal in marketable condition shall be allowed as a 
cost of washing.
    (e) Coal washing costs shall only be recognized as allowances when 
the washed coal is sold and royalties are reported and paid.



Sec. 206.458  Determination of washing allowances.

    (a) Arm's-length contracts. (1) For washing costs incurred by a 
lessee pursuant to an arm's-length contract, the washing allowance shall 
be the reasonable actual costs incurred by the lessee for washing the 
coal under that contract, subject to monitoring, review, audit, and 
possible future adjustment. MMS' prior approval is not required before a 
lessee may deduct costs incurred under an arm's-length contract. 
However, before any deduction may be taken, the lessee must submit a 
completed page one of Form MMS-4292, Coal Washing Allowance Report, in 
accordance with paragraph (c)(1) of this section. A washing allowance 
may be claimed retroactively for a period of not more than 3 months 
prior to the first day of the month that Form MMS-4292 is filed with 
MMS, unless MMS approves a longer period upon a showing of good cause by 
the lessee.
    (2) In conducting reviews and audits, MMS will examine whether the 
contract reflects more than the consideration actually transferred 
either directly or indirectly from the lessee to the washer for the 
washing. If the contract reflects more than the total consideration 
paid, then MMS may require that the washing allowance be determined in 
accordance with paragraph (b) of this section.
    (3) If MMS determines that the consideration paid pursuant to an 
arm's-length washing contract does not reflect the reasonable value of 
the washing because of misconduct by or between the contracting parties, 
or because the lessee otherwise has breached its duty to the lessor to 
market the production for the mutual benefit of the lessee and the 
lessor, then MMS shall require that the washing allowance be determined 
in accordance with paragraph (b) of this section. When MMS determines 
that the value of the washing may be unreasonable, MMS will notify the 
lessee and give the lessee an opportunity to provide written information 
justifying the lessee's washing costs.
    (4) Where the lessee's payments for washing under an arm's-length 
contract are not based on a dollar-per-unit basis, the lessee shall 
convert whatever consideration is paid to a dollar value equivalent. 
Washing allowances shall be expressed as a cost per ton of coal washed.
    (b) Non-arm's-length or no contract. (1) If a lessee has a non-
arm's-length contract or has no contract, including those situations 
where the lessee performs washing for itself, the washing allowance will 
be based upon the lessee's reasonable actual costs. All washing 
allowances deducted under a non-arm's-length or no contract situation 
are subject to monitoring, review, audit, and possible future 
adjustment. Prior MMS approval of washing allowances is not required for 
non-arm's-length or no contract situations. However, before any 
estimated or actual deduction may be taken, the lessee must submit a 
completed Form MMS-4292 in accordance with paragraph (c)(2) of this 
section. A washing allowance may be claimed retroactively for a period 
of not more than 3 months prior to the first day of the month that Form 
MMS-4292 is filed with MMS, unless MMS approves a longer period upon a 
showing of good cause by the lessee.

[[Page 119]]

MMS will monitor the allowance deduction to ensure that deductions are 
reasonable and allowable. When necessary or appropriate, MMS may direct 
a lessee to modify its actual washing allowance.
    (2) The washing allowance for non-arm's-length or no contract 
situations shall be based upon the lessee's actual costs for washing 
during the reported period, including operating and maintenance 
expenses, overhead, and either depreciation and a return on 
undepreciated capital investment in accordance with paragraph 
(b)(2)(iv)(A) of this section, or a cost equal to the depreciable 
investment in the wash plant multiplied by the rate of return in 
accordance with paragraph (b)(2)(iv)(B) of this section. Allowable 
capital costs are generally those for depreciable fixed assets 
(including costs of delivery and installation of capital equipment) 
which are an integral part of the wash plant.
    (i) Allowable operating expenses include: Operations supervision and 
engineering; operations labor; fuel; utilities; materials; ad valorem 
property taxes; rent; supplies; and any other directly allocable and 
attributable operating expense which the lessee can document.
    (ii) Allowable maintenance expenses include: Maintenance of the wash 
plant; maintenance of equipment; maintenance labor; and other directly 
allocable and attributable maintenance expenses which the lessee can 
document.
    (iii) Overhead attributable and allocable to the operation and 
maintenance of the wash plant is an allowable expense. State and Federal 
income taxes and severance taxes, including royalties, are not allowable 
expenses.
    (iv) A lessee may use either paragraph (b)(2)(iv)(A) or 
(b)(2)(iv)(B) of this section. After a lessee has elected to use either 
method for a wash plant, the lessee may not later elect to change to the 
other alternative without approval of MMS.
    (A) To compute depreciation, the lessee may elect to use either a 
straight-line depreciation method based on the life of equipment or on 
the life of the reserves which the wash plant services, whichever is 
appropriate, or a unit of production method. After an election is made, 
the lessee may not change methods without MMS approval. A change in 
ownership of a wash plant shall not alter the depreciation schedule 
established by the original operator/lessee for purposes of the 
allowance calculation. With or without a change in ownership, a wash 
plant shall be depreciated only once. Equipment shall not be depreciated 
below a reasonable salvage value.
    (B) MMS shall allow as a cost an amount equal to the allowable 
capital investment in the wash plant multiplied by the rate of return 
determined pursuant to paragraph (b)(2)(v) of this section. No allowance 
shall be provided for depreciation. This alternative shall apply only to 
plants first placed in service or acquired after March 1, 1989.
    (v) The rate of return shall be the industrial rate associated with 
Standard and Poor's BBB rating. The rate of return shall be the monthly 
average rate as published in Standard and Poor's Bond Guide for the 
first month of the reporting period for which the allowance is 
applicable and shall be effective during the reporting period. The rate 
shall be redetermined at the beginning of each subsequent washing 
allowance reporting period (which is determined pursuant to paragraph 
(c)(2) of this section).
    (3) The washing allowance for coal shall be determined based on the 
lessee's reasonable and actual cost of washing the coal. The lessee may 
not take an allowance for the costs of washing lease production that is 
not royalty bearing.
    (c) Reporting requirements. (1) Arm's-length contracts. (i) With the 
exception of those washing allowances specified in paragraphs (c)(1)(v) 
and (c)(1)(vi) of this section, the lessee shall submit page one of the 
initial Form MMS-4292 prior to, or at the same time, as the washing 
allowance determined pursuant to an arm's-length contract is reported on 
Form MMS-2014, Report of Sales and Royalty Remittance. A Form MMS-4292 
received by the end of the month that the Form MMS-2014 is due shall be 
considered to be received timely.

[[Page 120]]

    (ii) The initial Form MMS-4292 shall be effective for a reporting 
period beginning the month that the lessee is first authorized to deduct 
a washing allowance and shall continue until the end of the calendar 
year, or until the applicable contract or rate terminates or is modified 
or amended, whichever is earlier.
    (iii) After the initial reporting period and for succeeding 
reporting periods, lessees must submit page one of Form MMS-4292 within 
3 months after the end of the calendar year, or after the applicable 
contract or rate terminates or is modified or amended, whichever is 
earlier, unless MMS approves a longer period (during which period the 
lessee shall continue to use the allowance from the previous reporting 
period).
    (iv) MMS may require that a lessee submit arm's-length washing 
contracts and related documents. Documents shall be submitted within a 
reasonable time, as determined by MMS.
    (v) Washing allowances which are based on arm's-length contracts and 
which are in effect at the time these regulations become effective will 
be allowed to continue until such allowances terminate. For the purposes 
of this section, only those allowances that have been approved by MMS in 
writing shall qualify as being in effect at the time these regulations 
become effective.
    (vi) MMS may establish, in appropriate circumstances, reporting 
requirements that are different from the requirements of this section.
    (2) Non-arm's-length or no contract. (i) With the exception of those 
washing allowances specified in paragraphs (c)(2)(v) and (c)(2)(vii) of 
this section, the lessee shall submit an initial Form MMS-4292 prior to, 
or at the same time as, the washing allowance determined pursuant to a 
non-arm's-length contract or no contract situation is reported on Form 
MMS-2014, Report of Sales and Royalty Remittance. A Form MMS-4292 
received by the end of the month that the Form MMS-2014 is due shall be 
considered to be timely received. The initial reporting may be based on 
estimated costs.
    (ii) The initial Form MMS-4292 shall be effective for a reporting 
period beginning the month that the lessee first is authorized to deduct 
a washing allowance and shall continue until the end of the calendar 
year, or until the washing under the non-arm's-length contract or the no 
contract situation terminates, whichever is earlier.
    (iii) For calendar-year reporting periods succeeding the initial 
reporting period, the lessee shall submit a completed Form MMS-4292 
containing the actual costs for the previous reporting period. If coal 
washing is continuing, the lessee shall include on Form MMS-4292 its 
estimated costs for the next calendar year. The estimated coal washing 
allowance shall be based on the actual costs for the previous period 
plus or minus any adjustments which are based on the lessee's knowledge 
of decreases or increases which will affect the allowance. Form MMS-4292 
must be received by MMS within 3 months after the end of the previous 
reporting period, unless MMS approves a longer period (during which 
period the lessee shall continue to use the allowance from the previous 
reporting period).
    (iv) For new wash plants, the lessee's initial Form MMS-4292 shall 
include estimates of the allowable coal washing costs for the applicable 
period. Cost estimates shall be based upon the most recently available 
operations data for the plant, or if such data are not available, the 
lessee shall use estimates based upon industry data for similar coal 
wash plants.
    (v) Washing allowances based on non-arm's-length or no contract 
situations which are in effect at the time these regulations become 
effective will be allowed to continue until such allowances terminate. 
For the purposes of this section, only those allowances that have been 
approved by MMS in writing shall qualify as being in effect at the time 
these regulations become effective.
    (vi) Upon request by MMS, the lessee shall submit all data used by 
the lessee to prepare its Forms MMS-4292. The data shall be provided 
within a reasonable period of time, as determined by MMS.
    (vii) MMS may establish, in appropriate circumstances, reporting 
requirements which are different from the requirements of this section.

[[Page 121]]

    (3) MMS may establish coal washing allowance reporting dates for 
individual leases different from those specified in this subpart in 
order to provide more effective administration. Lessees will be notified 
of any change in their reporting period.
    (4) Washing allowances must be reported as a separate line on the 
Form MMS-2014, unless MMS approves a different reporting procedure.
    (d) Interest assessments for incorrect or late reports and failure 
to report. (1) If a lessee deducts a washing allowance on its Form MMS-
2014 without complying with the requirements of this section, the lessee 
shall be liable for interest on the amount of such deduction until the 
requirements of this section are complied with. The lessee also shall 
repay the amount of any allowance which is disallowed by this section.
    (2) If a lessee erroneously reports a washing allowance which 
results in an underpayment of royalties, interest shall be paid on the 
amount of that underpayment.
    (3) Interest required to be paid by this section shall be determined 
in accordance with 30 CFR 218.202.
    (e) Adjustments. (1) If the actual coal washing allowance is less 
than the amount the lessee has taken on Form MMS-2014 for each month 
during the allowance form reporting period, the lessee shall be required 
to pay additional royalties due plus interest computed pursuant to 30 
CFR 218.202, retroactive to the first month the lessee is authorized to 
deduct a washing allowance. If the actual washing allowance is greater 
than the amount the lessee has estimated and taken during the reporting 
period, the lessee shall be entitled to a credit, without interest.
    (2) The lessee must submit a corrected Form MMS-2014 to reflect 
actual costs, together with any payment, in accordance with instructions 
provided by MMS.
    (f) Other washing cost determinations. The provisions of this 
section shall apply to determine washing costs when establishing value 
using a net-back valuation procedure or any other procedure that 
requires deduction of washing costs.



Sec. 206.459  Allocation of washed coal.

    (a) When coal is subjected to washing, the washed coal must be 
allocated to the leases from which it was extracted.
    (b) When the net output of coal from a washing plant is derived from 
coal obtained from only one lease, the quantity of washed coal allocable 
to the lease will be based on the net output of the washing plant.
    (c) When the net output of coal from a washing plant is derived from 
coal obtained from more than one lease, unless determined otherwise by 
BLM, the quantity of net output of washed coal allocable to each lease 
will be based on the ratio of measured quantities of coal delivered to 
the washing plant and washed from each lease compared to the total 
measured quantities of coal delivered to the washing plant and washed.



Sec. 206.460  Transportation allowances--general.

    (a) For ad valorem leases subject to Sec. 206.456 of this subpart, 
where the value for royalty purposes has been determined at a point 
remote from the lease or mine, MMS shall, as authorized by this section, 
allow a deduction in determining value for royalty purposes for the 
reasonable, actual costs incurred to:
    (1) Transport the coal from an Indian lease to a sales point which 
is remote from both the lease and mine; or
    (2) Transport the coal from an Indian lease to a wash plant when 
that plant is remote from both the lease and mine and, if applicable, 
from the wash plant to a remote sales point. In-mine transportation 
costs shall not be included in the transportation allowance.
    (b) Under no circumstances shall the washing allowance and the 
transportation allowance authorized by Sec. 206.456 of this subpart 
reduce the value of coal under any selling arrangement to zero.
    (c)(1) When coal transported from a mine to a wash plant is eligible 
for a transportation allowance in accordance with this section, the 
lessee is not required to allocate transportation costs between the 
quantity of clean coal output and the rejected waste material. The 
transportation allowance shall be authorized for the total production

[[Page 122]]

which is transported. Transportation allowances shall be expressed as a 
cost per ton of cleaned coal transported.
    (2) For coal that is not washed at a wash plant, the transportation 
allowance shall be authorized for the total production which is 
transported. Transportation allowances shall be expressed as a cost per 
ton of coal transported.
    (3) Transportation costs shall only be recognized as allowances when 
the transported coal is sold and royalties are reported and paid.
    (d) If, after a review and/or audit, MMS determines that a lessee 
has improperly determined a transportation allowance authorized by this 
section, then the lessee shall pay any additional royalties, plus 
interest, determined in accordance with 30 CFR 218.202, or shall be 
entitled to a credit, without interest.
    (e) Lessees shall not disproportionately allocate transportation 
costs to Indian leases.



Sec. 206.461  Determination of transportation allowances.

    (a) Arm's-length contracts. (1) For transportation costs incurred by 
a lessee pursuant to an arm's-length contract, the transportation 
allowance shall be the reasonable, actual costs incurred by the lessee 
for transporting the coal under that contract, subject to monitoring, 
review, audit, and possible future adjustment. MMS' prior approval is 
not required before a lessee may deduct costs incurred under an arm's-
length contract. However, before any deduction may be taken, the lessee 
must submit a completed page one of Form MMS-4293, Coal Transportation 
Allowance Report, in accordance with paragraph (c)(1) of this section. A 
transportation allowance may be claimed retroactively for a period of 
not more than 3 months prior to the first day of the month that Form 
MMS-4293 is filed with MMS, unless MMS approves a longer period upon a 
showing of good cause by the lessee.
    (2) In conducting reviews and audits, MMS will examine whether the 
contract reflects more than the consideration actually transferred 
either directly or indirectly from the lessee to the transporter for the 
transportation. If the contract reflects more than the total 
consideration paid, then MMS may require that the transportation 
allowance be determined in accordance with paragraph (b) of this 
section.
    (3) If MMS determines that the consideration paid pursuant to an 
arm's-length transportation contract does not reflect the reasonable 
value of the transportation because of misconduct by or between the 
contracting parties, or because the lessee otherwise has breached its 
duty to the lessor to market the production for the mutual benefit of 
the lessee and the lessor, then MMS shall require that the 
transportation allowance be determined in accordance with paragraph (b) 
of this section. When MMS determines that the value of the 
transportation may be unreasonable, MMS will notify the lessee and give 
the lessee an opportunity to provide written information justifying the 
lessee's transportation costs.
    (4) Where the lessee's payments for transportation under an arm's-
length contract are not based on a dollar-per-unit basis, the lessee 
shall convert whatever consideration is paid to a dollar value 
equivalent for the purposes of this section.
    (b) Non-arm's-length or no contract. (1) If a lessee has a non-
arm's-length contract or has no contract, including those situations 
where the lessee performs transportation services for itself, the 
transportation allowance will be based upon the lessee's reasonable 
actual costs. All transportation allowances deducted under a non-arm's-
length or no contract situation are subject to monitoring, review, 
audit, and possible future adjustment. Prior MMS approval of 
transportation allowances is not required for non-arm's-length or no 
contract situations. However, before any estimated or actual deduction 
may be taken, the lessee must submit a completed Form MMS-4293 in 
accordance with paragraph (c)(2) of this section. A transportation 
allowance may be claimed retroactively for a period of not more than 3 
months prior to the first day of the month that Form MMS-4293 is filed 
with MMS, unless MMS approves a longer period upon a showing of good 
cause by the

[[Page 123]]

lessee. MMS will monitor the allowance deductions to ensure that 
deductions are reasonable and allowable. When necessary or appropriate, 
MMS may direct a lessee to modify its estimated or actual transportation 
allowance deduction.
    (2) The transportation allowance for non-arm's-length or no contract 
situations shall be based upon the lessee's actual costs for 
transportation during the reporting period, including operating and 
maintenance expenses, overhead, and either depreciation and a return on 
undepreciated capital investment in accordance with paragraph 
(b)(2)(iv)(A) of this section, or a cost equal to the depreciable 
investment in the transportation system multiplied by the rate of return 
in accordance with paragraph (b)(2)(iv)(B) of this section. Allowable 
capital costs are generally those for depreciable fixed assets 
(including costs of delivery and installation of capital equipment) 
which are an integral part of the transportation system.
    (i) Allowable operating expenses include: Operations supervision and 
engineering; operations labor; fuel; utilities; materials; ad valorem 
property taxes; rent; supplies; and any other directly allocable and 
attributable operating expense which the lessee can document.
    (ii) Allowable maintenance expenses include: Maintenance of the 
transportation system; maintenance of equipment; maintenance labor; and 
other directly allocable and attributable maintenance expenses which the 
lessee can document.
    (iii) Overhead attributable and allocable to the operation and 
maintenance of the transportation system is an allowable expense. State 
and Federal income taxes and severance taxes and other fees, including 
royalties, are not allowable expenses.
    (iv) A lessee may use either paragraph (b)(2)(iv)(A) or paragraph 
(b)(2)(iv)(B) of this section. After a lessee has elected to use either 
method for a transportation system, the lessee may not later elect to 
change to the other alternative without approval of MMS.
    (A) To compute depreciation, the lessee may elect to use either a 
straight-line depreciation method based on the life of equipment or on 
the life of the reserves which the transportation system services, 
whichever is appropriate, or a unit of production method. After an 
election is made, the lessee may not change methods without MMS 
approval. A change in ownership of a transportation system shall not 
alter the depreciation schedule established by the original transporter/
lessee for purposes of the allowance calculation. With or without a 
change in ownership, a transportation system shall be depreciated only 
once. Equipment shall not be depreciated below a reasonable salvage 
value.
    (B) MMS shall allow as a cost an amount equal to the allowable 
capital investment in the transportation system multiplied by the rate 
of return determined pursuant to paragraph (b)(2)(B)(v) of this section. 
No allowance shall be provided for depreciation. This alternative shall 
apply only to transportation facilities first placed in service or 
acquired after March 1, 1989.
    (v) The rate of return shall be the industrial rate associated with 
Standard and Poor's BBB rating. The rate of return shall be the monthly 
average as published in Standard and Poor's Bond Guide for the first 
month of the reporting period of which the allowance is applicable and 
shall be effective during the reporting period. The rate shall be 
redetermined at the beginning of each subsequent transportation 
allowance reporting period (which is determined pursuant to paragraph 
(c)(2) of this section).
    (3) A lessee may apply to MMS for exception from the requirement 
that it compute actual costs in accordance with paragraphs (b)(1) and 
(b)(2) of this section. MMS will grant the exception only if the lessee 
has a rate for the transportation approved by a Federal agency for 
Indian leases. MMS shall deny the exception request if it determines 
that the rate is excessive as compared to arm's-length transportation 
charges by systems, owned by the lessee or others, providing similar 
transportation services in that area. If there are no arm's-length 
transportation charges, MMS shall deny the exception request if:

[[Page 124]]

    (i) No Federal regulatory agency cost analysis exists and the 
Federal regulatory agency has declined to investigate pursuant to MMS 
timely objections upon filing; and
    (ii) The rate significantly exceeds the lessee's actual costs for 
transportation as determined under this section.
    (c) Reporting requirements. (1) Arm's-length contracts. (i) With the 
exception of those transportation allowances specified in paragraphs 
(c)(1)(v) and (c)(1)(vi) of this section, the lessee shall submit page 
one of the initial Form MMS-4293 prior to, or at the same time as, the 
transportation allowance determined pursuant to an arm's-length contract 
is reported on Form MMS-2014, Reports of Sales and Royalty Remittance.
    (ii) The initial Form MMS-4293 shall be effective for a reporting 
period beginning the month that the lessee is first authorized to deduct 
a transportation allowance and shall continue until the end of the 
calendar year, or until the applicable contract or rate terminates or is 
modified or amended, whichever is earlier.
    (iii) After the initial reporting period and for succeeding 
reporting periods, lessees must submit page one of Form MMS-4293 within 
3 months after the end of the calendar year, or after the applicable 
contract or rate terminates or is modified or amended, whichever is 
earlier, unless MMS approves a longer period (during which period the 
lessee shall continue to use the allowance from the previous reporting 
period). Lessees may request special reporting procedures in unique 
allowance reporting situations, such as those related to spot sales.
    (iv) MMS may require that a lessee submit arm's-length 
transportation contracts, production agreements, operating agreements, 
and related documents. Documents shall be submitted within a reasonable 
time, as determined by MMS.
    (v) Transportation allowances that are based on arm's-length 
contracts and which are in effect at the time these regulations become 
effective will be allowed to continue until such allowances terminate. 
For the purposes of this section, only those allowances that have been 
approved by MMS in writing shall qualify as being in effect at the time 
these regulations become effective.
    (vi) MMS may establish, in appropriate circumstances, reporting 
requirements that are different from the requirements of this section.
    (2) Non-arm's-length or no contract. (i) With the exception of those 
transportation allowances specified in paragraphs (c)(2)(v) and 
(c)(2)(vii) of this section, the lessee shall submit an initial Form 
MMS-4293 prior to, or at the same time as, the transportation allowance 
determined pursuant to a non-arm's-length contract or no contract 
situation is reported on Form MMS-2014, Report of Sales and Royalty 
Remittance. The initial report may be based on estimated costs.
    (ii) The initial Form MMS-4293 shall be effective for a reporting 
period beginning the month that the lessee first is authorized to deduct 
a transportation allowance and shall continue until the end of the 
calendar year, or until the transportation under the non-arm's-length 
contract or the no contract situation terminates, whichever is earlier.
    (iii) For calendar-year reporting periods succeeding the initial 
reporting period, the lessee shall submit a completed Form MMS-4293 
containing the actual costs for the previous reporting period. If the 
transportation is continuing, the lessee shall include on Form MMS-4293 
its estimated costs for the next calendar year. The estimated 
transportation allowance shall be based on the actual costs for the 
previous reporting period plus or minus any adjustments that are based 
on the lessee's knowledge of decreases or increases that will affect the 
allowance. Form MMS-4293 must be received by MMS within 3 months after 
the end of the previous reporting period, unless MMS approves a longer 
period (during which period the lessee shall continue to use the 
allowance from the previous reporting period).
    (iv) For new transportation facilities or arrangements, the lessee's 
initial Form MMS-4293 shall include estimates of the allowable 
transportation costs for the applicable period. Cost estimates shall be 
based upon the most recently available operations data for

[[Page 125]]

the transportation system, or, if such data are not available, the 
lessee shall use estimates based upon industry data for similar 
transportation systems.
    (v) Non-arm's-length contract or no contract-based transportation 
allowances that are in effect at the time these regulations become 
effective will be allowed to continue until such allowances terminate. 
For purposes of this section, only those allowances that have been 
approved by MMS in writing shall qualify as being in effect at the time 
these regulations become effective.
    (vi) Upon request by MMS, the lessee shall submit all data used to 
prepare its Form MMS-4293. The data shall be provided within a 
reasonable period of time, as determined by MMS.
    (vii) MMS may establish, in appropriate circumstances, reporting 
requirements that are different from the requirements of this section.
    (viii) If the lessee is authorized to use its Federal-agency-
approved rate as its transportation cost in accordance with paragraph 
(b)(3) of this section, it shall follow the reporting requirements of 
paragraph (c)(1) of this section.
    (3) MMS may establish reporting dates for individual lessees 
different than those specified in this paragraph in order to provide 
more effective administration. Lessees will be notified as to any change 
in their reporting period.
    (4) Transportation allowances must be reported as a separate line 
item on Form MMS-2014, unless MMS approves a different reporting 
procedure.
    (d) Interest assessments for incorrect or late reports and failure 
to report. (1) If a lessee deducts a transportation allowance on its 
Form MMS-2014 without complying with the requirements of this section, 
the lessee shall be liable for interest on the amount of such deduction 
until the requirements of this section are complied with. The lessee 
also shall repay the amount of any allowance which is disallowed by this 
section.
    (2) If a lessee erroneously reports a transportation allowance which 
results in an underpayment of royalties, interest shall be paid on the 
amount of that underpayment.
    (3) Interest required to be paid by this section shall be determined 
in accordance with 30 CFR 218.202.
    (e) Adjustments. (1) If the actual transportation allowance is less 
than the amount the lessee has taken on Form MMS-2014 for each month 
during the allowance form reporting period, the lessee shall be required 
to pay additional royalties due plus interest, computed pursuant to 30 
CFR 218.202, retroactive to the first month the lessee is authorized to 
deduct a transportation allowance. If the actual transportation 
allowance is greater than the amount the lessee has estimated and taken 
during the reporting period, the lessee shall be to a credit, without 
interest.
    (2) The lessee must submit a corrected Form MMS-2014 to reflect 
actual costs, together with any payment, in accordance with instructions 
provided by MMS.
    (f) Other transportation cost determinations. The provisions of this 
section shall apply to determine transportation costs when establishing 
value using a net-back valuation procedure or any other procedure that 
requires deduction of transportation costs.



Sec. 206.462  Contract submission.

    (a) The lessee and other payors shall submit to MMS, upon request, 
contracts for the sale of coal from ad valorem leases subject to this 
subpart. MMS must receive the contracts within a reasonable period of 
time, as specified by MMS. Lessees shall include as part of the 
submittal requirements any contracts, agreements, contract amendments, 
or other documents that affect the gross proceeds received for the sale 
of coal, as well as any other information regarding any consideration 
received for the sale or disposition of coal that is not included in 
such contracts. At the time of its contract submittals, MMS may require 
the lessee to certify in writing that it has provided all documents and 
information that reflect the total consideration provided by purchasers 
of coal from ad valorem leases subject to this subpart. Information 
requested under this section may include contracts for both ad valorem 
and cents-per-ton leases and shall be available in the lessee's offices 
during normal business hours or provided to

[[Page 126]]

MMS at such time and in such manner as may be requested by authorized 
Department of the Interior personnel. Any oral sales arrangement 
negotiated by the lessee must be placed in a written form and be 
retained by the lessee. Nothing in this section shall be construed to 
limit the authority of MMS to obtain or have access to information 
pursuant to 30 CFR part 212.
    (b) Lessees and other payors shall designate, for each contract 
submitted pursuant to this section, whether the contract in arm's-length 
or non-arm's-length.
    (c) A lessee's or other payor's determination that its contract is 
arm's-length is subject to future audit to verify that the contract 
meets the criteria of the arm's-length contract definition in 
Sec. 206.251 of this subpart.
    (d) Information required to be submitted under this section that 
constitutes trade secrets and commercial and financial information that 
is identified as privileged or confidential shall not be available for 
public inspection or made public or disclosed without the consent of the 
lessee or other payor, except as otherwise provided by law or 
regulation.



Sec. 206.463  In-situ and surface gasification and liquefaction operations.

    In an ad valorem Federal coal lease is developed by in-situ or 
surface gasification or liquefaction technology, the lessee shall 
propose the value of coal for royalty purposes to MMS. MMS will review 
the lessee's proposal and issue a value determination. The lessee may 
use its proposed value until MMS issues a value determination.



Sec. 206.464  Value enhancement of marketable coal.

    If, prior to use, sale, or other disposition, the lessee enhances 
the value of coal after the coal has been placed in marketable condition 
in accordance with Sec. 206.456(h) of this subpart, the lessee shall 
notify MMS that such processing is occurring or will occur. The value of 
that production shall be determined as follows:
    (a) A value established for the feedstock coal in marketable 
condition by application of the provisions of Sec. 206.465(c)(2) (i) 
through (iv) of this subpart; or,
    (b) In the event that a value cannot be established in accordance 
with paragraph (a) of this section, then the value of production will be 
determined in accordance with Sec. 206.456(c)(2)(v) of this subpart and 
the value shall be the lessee's gross proceeds accruing from the 
disposition of the enhanced product, reduced by MMS-approved processing 
costs and procedures including a rate of return on investment equal to 
two times the Standard and Poor's BBB bond rate applicable under 
Sec. 206.458(b)(2)(v) of this subpart.



PART 207--SALES AGREEMENTS OR CONTRACTS GOVERNING THE DISPOSAL OF LEASE PRODUCTS--Table of Contents




                      Subpart A--General Provisions

Sec.
207.1  Required recordkeeping.
207.2  Definitions.
207.3  Contracts made pursuant to new form leases.
207.4  Contracts made pursuant to old form leases.
207.5  Contract and sales agreement retention.

         Subpart B--Oil, Gas and OCS Sulfur, General [Reserved]

              Subpart C--Federal and Indian Oil [Reserved]

              Subpart D--Federal and Indian Gas [Reserved]

              Subpart E--Solid Minerals, General [Reserved]

                       Subpart F--Coal [Reserved]

               Subpart G--Other Solid Minerals [Reserved]

               Subpart H--Geothermal Resources [Reserved]

                    Subpart I--OCS Sulfur [Reserved]

    Authority: 5 U.S.C. 301 et seq.; 25 U.S.C. 396 et seq.; 25 U.S.C. 
396a et seq.; 25 U.S.C. 2101 et seq.; 30 U.S.C. 181 et seq.; 30 U.S.C. 
351 et seq.; 30 U.S.C. 1001 et seq.; 30 U.S.C. 1701 et seq.; 31 U.S.C. 
3716 et seq.; 31 U.S.C. 9701; 43 U.S.C. 1301 et seq.; 43 U.S.C. 1331 et 
seq.; and 43 U.S.C. 1801 et seq.


[[Page 127]]


    Source: 53 FR 1225, Jan. 15, 1988, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 207.1  Required recordkeeping.

    (a) The information collection and recordkeeping requirements 
contained in this part have been approved by OMB under 44 U.S.C. 3501 et 
seq. and assigned OMB Clearance Number 1010-0061. The information 
collected will be used to determine a proper transportation allowance 
for the cost of transporting royalty oil from the lease to a delivery 
point remote from the lease. The information is required in order to 
obtain a benefit and is collected in accordance with the Federal Oil and 
Gas Royalty Management Act of 1982, 30 U.S.C. 1701 et seq.
    (b) Public reporting burden is estimated to average 30 minutes per 
year for each record keeper to maintain copies of sales contracts, 
agreements, or other documents relevant to the valuation of production. 
Send any comments regarding this burden estimate or any other aspect of 
this requirement to the Information Collection Clearance Officer, 
Minerals Management Service, 381 Elden Street, Herndon, VA 22070, and to 
the Office of Information and Regulatory Affairs, Office of Management 
and Budget, Paperwork Reduction Project 1010-0061, Washington, DC 20503.

[57 FR 41864, Sept. 14, 1992, as amended at 58 FR 64901, Dec. 10, 1994]



Sec. 207.2  Definitions.

    The definitions in part 206 of this title are applicable to this 
part.



Sec. 207.3  Contracts made pursuant to new form leases.

    On November 29, 1950 (15 FR 8585), a new lease form was adopted 
(Form 4-1158, 15 FR 8585) containing provisions whereby the lessee 
agrees that nothing in any contract or other arrangement made for the 
sale or disposal of oil, gas, natural gasoline, and other products of 
the leased land, shall be construed as modifying any of the provisions 
of the lease, including, but not limited to, provisions relating to gas 
waste, taking royalty-in-kind, and the method of computing royalties due 
as based on a minimum valuation and in accordance with the oil and gas 
valuation regulations. A contract or agreement pursuant to a lease 
containing such provisions may be made without obtaining prior approval 
of the United States as lessor, but must be retained as provided in 
Sec. 207.5 of this subpart.



Sec. 207.4  Contracts made pursuant to old form leases.

    (a) Old form leases are those containing provisions prohibiting 
sales or disposal of oil, gas, natural gasoline, and other products of 
the lease except in accordance with a contract or other arrangement 
approved by the Secretary of the Interior, or by the Director of the 
Minerals Management Service or his/her representative. A contract or 
agreement made pursuant to an old form lease may be made without 
obtaining approval if the contract or agreement contains either the 
substance of or is accompanied by the stipulation set forth in paragraph 
(b) of this section, signed by the seller (lessee or operator).
    (b) The stipulation, the substance of which must be included in the 
contract, or be made the subject matter of a separate instrument 
properly identifying the leases affected thereby, is as follows:

    It is hereby understood and agreed that nothing in the written 
contract or in any approval thereof shall be construed as affecting any 
of the relations between the United States and its lessee, particularly 
in matters of gas waste, taking royalty in kind, and the method of 
computing royalties due as based on a minimum valuation and in 
accordance with the terms and provisions of the oil and gas valuation 
regulations applicable to the lands covered by said contract.



Sec. 207.5  Contract and sales agreement retention.

    Copies of all sales contracts, posted price bulletins, etc., and 
copies of all agreements, other contracts, or other documents which are 
relevant to the valuation of production are to be maintained by the 
lessee and made available upon request during normal working hours to 
authorized MMS, State or Indian representatives, other MMS or BLM 
officials, auditors of the General Accounting Office, or other persons 
authorized to receive such documents, or

[[Page 128]]

shall be submitted to MMS within a reasonable period of time, as 
determined by MMS. Any oral sales arrangement negotiated by the lessee 
must be placed in written form and retained by the lessee. Records shall 
be retained in accordance with 30 CFR part 212.



         Subpart B--Oil, Gas, and OCS Sulfur, General [Reserved]



              Subpart C--Federal and Indian Oil [Reserved]



              Subpart D--Federal and Indian Gas [Reserved]



              Subpart E--Solid Minerals, General [Reserved]



                       Subpart F--Coal [Reserved]



               Subpart G--Other Solid Minerals [Reserved]



               Subpart H--Geothermal Resources [Reserved]



                    Subpart I--OCS Sulfur [Reserved]



PART 208--SALE OF FEDERAL ROYALTY OIL--Table of Contents




                      Subpart A--General Provisons

Sec. 
208.1  General.
208.2  Definitions.
208.3  Information collection.
208.4  Royalty oil sales to eligible refiners.
208.5  Notice of royalty oil sale.
208.6  General application procedures.
208.7  Determination of eligibility.
208.8  Transportation and delivery.
208.9  Agreements.
208.10  Notices.
208.11  Surety requirements.
208.12  Payment requirements.
208.13  Reporting requirements.
208.14  Civil and criminal penalties.
208.15  Audits.
208.16  Appeals.
208.17  Suspensions for national emergencies.

    Authority: 5 U.S.C. 301 et seq.; 30 U.S.C. 181 et seq.; 30 U.S.C. 
351 et seq.; 30 U.S.C. 1701 et seq.; 31 U.S.C. 9701; 43 U.S.C. 1301 et 
seq.; 43 U.S.C. 1331 et seq. and 43 U.S.C. 1801 et seq.

    Source: 52 FR 41913, Oct. 30, 1987, unless otherwise noted.

[[Page 129]]



                      Subpart A--General Provisions



Sec. 208.1  General.

    The regulations in this part govern the sale of royalty oil by the 
United States to eligible refiners. The regulations apply to royalty oil 
from leases on Federal lands onshore and on the Outer Continental Shelf 
(OCS).



Sec. 208.2  Definitions.

    Allotment means the quantity of royalty oil that DOI determines is 
available to each eligible refiner that has applied for a portion of the 
total volume of royalty oil offered in a given royalty oil sale.
    Application means the formal written request to DOI on Form MMS-4070 
by an eligible refiner interested in purchasing a quantity of royalty 
oil from the approximate volume announced by DOI in a given ``Notice of 
Availability of Royalty Oil.''
    Area or Region means the geographic territory having Federal oil and 
gas leases over which MMS has jurisdiction, unless the context in which 
those words are used indicates that a different meaning is intended.
    Delivery point means the point where the lessor, in accordance with 
lease terms, directs the lessee to deliver royalty oil to a purchaser. 
Title to the royalty oil, or to the quantity thereof in a commingled 
stream, passes from the Federal Government to the purchaser at this 
designated point, which is specified in the royalty oil contract. For 
onshore leases, the delivery point will be on or adjacent to the lease, 
except as provided in Sec. 208.8(a) of this part. In instances where an 
onshore delivery point is designated for offshore royalty oil, such 
point generally will be the first onshore point where the price of the 
oil, including transportation costs, can be determined and where the 
purchaser can either exchange or take delivery of the oil. The 
Government does not guarantee physical access to the oil at such point.
    Director means the Director of MMS, who is responsible for its 
overall direction, or his or her delegate(s).
    DOI means the Department of the Interior, including the Secretary or 
his or her delegate(s).
    Eligible refiner means a refiner of crude oil that meets the 
following criteria for eligibility to purchase royalty oil:
    (1) For the purchase of royalty oil from onshore leases, it means a 
refiner that qualifies as a small and independent refiner as those terms 
are defined in sections 3(3) and 3(4) of the Emergency Petroleum 
Allocation Act, 15 U.S.C. 751 et seq., except that the time period for 
determination contained in section 3(3)(A) would be the calendar quarter 
immediately preceding the date of the applicable ``Notice of 
Availability of Royalty Oil.'' A refiner that, together with all persons 
controlled by, in control of, under common control with, or otherwise 
affiliated with the refiner, inputs a volume of domestic crude oil from 
its own production exceeding 30 percent of its total refinery input of 
crude oil is ineligible to participate in royalty oil sales under this 
part. Crude oil received in exchange for such refiner's own production 
is considered to be that refiner's own production for purposes of this 
section.
    (2) For the purchase of royalty oil from leases on the OCS, it means 
a refiner that qualifies as a small business enterprise under the rules 
of the Small Business Administration (13 CFR part 121).
    Entitlement means the volume of royalty oil from the Federal 
Government's share of production from a Federal lease which a purchaser 
is entitled to receive under a royalty oil contract.
    Exchange agreement means a written agreement between the purchaser 
and another person for the exchange of royalty oil purchased under this 
part for other oil on a volume or equivalent value basis.
    Fair market value means the value of oil--(1) Computed at a unit 
price equivalent to the average unit price at which oil was sold 
pursuant to a lease during the period for which any royalty or net 
profit share is accrued or reserved to the United States pursuant to 
such lease, or
    (2) If there were no such sales, or if the Secretary finds that 
there were an insufficient number of such sales to equitably determine 
such value, computed at the average unit price at which oil was sold 
pursuant to other

[[Page 130]]

leases in the same region of the OCS during such period, or
    (3) If there were no sales of oil from such region during such 
period, or if the Secretary finds that there are an insufficient number 
of such sales to equitably determine such value, at an appropriate price 
determined by the Secretary.
    Federal lease means a contractual agreement with the Federal 
Government which authorizes the exploration, development, and production 
of oil and gas on Federal lands onshore or on the OCS.
    Interim sale means a sale conducted as a result of substantial 
additional royalty oil becoming available in a specific area prior to 
the scheduled expiration date of royalty oil contracts in effect for 
that area.
    Lessee means any person to whom the United States issues a lease, or 
any person who has been assigned an obligation to make royalty or other 
payments required by the lease.
    MMS means the Minerals Management Service of the Department of the 
Interior.
    Notice of Availability of Royalty Oil means a notice published by 
DOI in the Federal Register (and in other printed media when 
appropriate, such as a newspaper or magazine of general or specialized 
circulation) to advise interested parties of the availability of royalty 
oil for purchase by eligible refiners and the approximate volume of 
royalty oil available to the applicants.
    OCS means the Outer Continental Shelf, as defined in 43 U.S.C. 
1331(a).
    OCSLA means the Outer Continental Shelf Lands Act (43 U.S.C. 1331 et 
seq., as amended by 43 U.S.C. 1801 et seq.).
    Oil means a mixture of hydrocarbons that existed in the liquid phase 
in natural underground reservoirs and remains liquid at atmospheric 
pressure after passing through surface separating facilities and is 
marketed or used as such. Condensate recovered in lease separators or 
field facilities is considered to be oil.
    Operator means any person, including a lessee, who has control of or 
who manages operations on an oil and gas lease site on Federal onshore 
lands or on the OCS.
    Payor means any person responsible for reporting royalties from a 
Federal lease or leases on Form MMS-2014.
    Person means any individual, firm, corporation, association, 
partnership, consortium, or joint venture.
    Preference eligible refiner means an eligible refiner with at least 
one operating refinery which is located within the area designated as 
the preference eligible area in the ``Notice of Availability of Royalty 
Oil.'' A refiner may be deemed to be a preference eligible refiner if it 
owns a refinery located in the preference eligible area which is not 
operational if the refiner meets the requirements of Sec. 208.7(g) of 
this part.
    Purchaser means anyone who acquires royalty oil sold by DOI under 
the Federal Government's Royalty-in-Kind (RIK) Program and who has a 
contractual obligation under an agreement to purchase royalty oil.
    Reallocation means an offering of royalty oil previously allocated 
in a specific sale but subsequently turned back to MMS. A reallocation 
would only be made if substantial amounts of royalty oil are turned 
back.
    Refined petroleum product means gasoline, kerosene, distillates 
(including Number 2 fuel oil), refined lubricating oils, or diesel fuel.
    Royalty oil means that amount of oil that DOI takes in kind in 
partial or full satisfaction of a lessee's royalty or net profit share 
obligations as determined by whatever lease interest the lessee holds 
under an applicable mineral leasing law.
    Secretary means the Secretary of the Department of the Interior or 
his/her delegate(s).
    Section 6 lease means an oil and gas lease originally issued by any 
State and currently maintained in effect pursuant to section 6 of the 
OCSLA.
    Section 8 lease means an oil and gas lease originally issued by the 
United States pursuant to section 8 of the OCSLA.
[52 FR 41913, Oct. 30, 1987; 52 FR 45528, Nov. 30, 1987; 58 FR 64901, 
Dec. 10, 1993]



Sec. 208.3  Information collection.

    The information collection requirements contained in this part have 
been approved by OMB under 44 U.S.C. 3501

[[Page 131]]

et seq. The form, filing date, and approved OMB clearance number are 
identified in 30 CFR 210.10.

[58 FR 64901, Dec. 10, 1993]



Sec. 208.4  Royalty oil sales to eligible refiners.

    (a) Determination to take royalty oil in kind. The Secretary may 
evaluate crude oil market conditions from time to time. The evaluation 
will include, among other things, the availability of crude oil and the 
crude oil requirements of the Federal Government, primarily those 
requirements concerning matters of national interest and defense. The 
Secretary will review these items and will determine whether eligible 
refiners have access to adequate supplies of crude oil and whether such 
oil is available to eligible refiners at equitable prices. Such 
determinations may be made on a regional basis. The determination by the 
Secretary shall be published in the Federal Register concurrent with or 
included in the ``Notice of Availability of Royalty Oil'' required by 30 
CFR 208.5.
    (b) Sale to eligible refiners. (1) Upon a determination by the 
Secretary under paragraph (a) of this section that eligible refiners do 
not have access to adequate supplies of crude oil at equitable prices, 
the Secretary, at his or her discretion, may elect to take in kind some 
or all of the royalty oil accruing to the United States from oil and gas 
leases on Federal lands onshore and on the OCS. The Secretary may 
authorize MMS to offer royalty oil for sale to eligible refiners only 
for use in their refineries and not for resale (other than under an 
exchange agreement).
    (2) All sales of royalty oil from onshore leases will be priced at 
the royalty value that would have been determined for that oil pursuant 
to 30 CFR part 206 had the royalties been paid in value rather than 
taken in kind. All sales of royalty oil from OCS leases will be priced 
at the fair market value of the oil including associated transportation 
costs to the designated delivery point, if applicable.
    (3) An eligible refiner must have a representative at a sale in 
order to participate. The Secretary may, at his or her discretion, 
establish purchase limitations and withhold any royalty oil from any 
offering.
    (4) The MMS will recover the administrative costs of the RIK Program 
through the collection of administrative fees. The fees will consist of 
an initial nonrefundable contract fee for each executed contract and a 
monthly variable charge applied to each lease under contract. The amount 
of the initial contract fee shall be determined prior to a sale and 
published in the ``Notice of Availability of Royalty Oil.'' The initial 
contract fee will be payable in equal installments due at the end of the 
first and second months of the contract. These contract fees will be 
applied against the RIK Program's administrative costs, and the 
remainder of the administrative costs will be recovered through the 
monthly variable charges per lease, which will be billed and payable 
concurrently with the monthly actual billings for royalty oil. The rate 
per lease will be determined by dividing the remaining recoverable 
administrative costs by the total number of leases under contract. The 
rate may change depending upon whether total administrative costs change 
and/or whether the number of leases taken in kind changes from one month 
to another. In instances where production from a lease is sold on a 
percentage basis to two or more purchasers, each percentage portion of 
the lease will be considered a separate lease for purposes of 
administrative fee determination.
    (c) Upon a determination by the Secretary under paragraph (a) of 
this section that eligible refiners do have access to adequate supplies 
of crude oil at equitable prices, MMS will not take royalties in kind 
from oil and gas leases for exclusive sale to such refiners. Such 
determinations may be made on a regional basis.
    (d) Interim sales. The MMS generally will not conduct interim sales. 
However, interim sales may be held at the discretion of the Secretary if 
substantial addition royalty oil becomes available. The potentially 
eligible refiners, individually or collectively, must submit 
documentation demonstrating that

[[Page 132]]

adequate supplies of crude oil at equitable prices are not available for 
purchase. Although sufficient documentation must be submitted, it is not 
mandatory for each potentially eligible refiner to participate in a 
submission of such documentation to be determined eligible. The 
documentation must be submitted to MMS for a determination as to whether 
an interim sale is needed.



Sec. 208.5  Notice of royalty oil sale.

    If the Secretary decides to take royalty oil in kind for sale to 
eligible refiners, MMS will issue a ``Notice of Availability of Royalty 
Oil'' specifying the manner in which the sale is to be effected, the 
approximate quantity of royalty oil to be offered, information required 
in applications, the closing date for the receipt of applications for 
royalty oil, and other general administrative details concerning the 
application, allocation, and contract award process for the royalty oil. 
The Notice will describe generally the terms under which the royalty oil 
contracts will be awarded and will specify which applicants will be 
deemed preference eligible refiners in the sale proceedings. The Notice 
will also contain guidelines for reallocation procedures in the event 
substantial quantities of royalty oil sold in that specific sale are 
subsequently turned back to MMS. Only those purchasers that hold ongoing 
contracts from that specific sale will be allowed to participate in any 
reallocation, which would be voluntary, and then only if they continue 
to meet eligibility requirements as set forth in 30 CFR 208.2 and 208.7. 
If a reallocation is held prior to the effective date of the contracts 
as specified in the ``Notice of Availability of Royalty Oil'', all 
eligible refiners that selected a lease or leases in that specific sale 
would be allowed to participate, pursuant to the procedures in the 
Notice.



Sec. 208.6  General application procedures.

    (a) To apply for the purchase of royalty oil, an applicant must file 
a Form MMS-4070 with MMS in accordance with instructions provided in the 
``Notice of Availability of Royalty Oil'' and in accordance with any 
instructions issued by MMS for completion of Form MMS-4070. The 
applicant will be required to submit a letter of intent from a qualified 
financial institution stating that it would be granted surety coverage 
for the royalty oil for which it is applying, or other such proof of 
surety coverage, as deemed acceptable by MMS. The letter of intent must 
be submitted with a completed Form MMS-4070.
    (b) In addition to any other application requirements specified in 
the Notice, the following information is required on Form MMS-4070 at 
the time of application:
    (1) Name and address of the applicant, the location of the 
applicant's refinery or refineries, and disclosure of the applicant's 
affiliation with any other persons.
    (2) The capacity of the applicant's refineries in barrels of crude 
oil throughput per calendar day and a tabulation for the past 12 months 
of oil processed for each refinery, identified as to source (from own 
production or from other sources).
    (3) Identification of any Government royalty oil contracts under 
which the applicant is currently receiving royalty oil.
    (4) Identification of the locations (area/region and State) where 
the applicant proposes to purchase royalty oil, the volume of oil 
requested, and the specific refineries in which the oil will be refined.
    (5) A certification from the applicant that it is an eligible 
refiner for the purchase of Government royalty oil, as defined in 
Sec. 208.2 of this part.

[52 FR 41913, Oct. 30, 1987, as amended at 58 FR 64901, Dec. 10, 1993]



Sec. 208.7  Determination of eligibility.

    (a) The MMS will examine each application and may request additional 
information if the information in the application is inadequate. An 
application received after the close of the application period will be 
rejected. If additional information is requested by MMS, it must be 
received by the time specified or the application will be rejected.
    (b) After the close of the application period and the receipt of any 
additional

[[Page 133]]

requested information, MMS will determine which applicants may 
participate in the royalty oil sale and the quantity of royalty oil 
which each applicant is authorized to purchase.
    (c) When applications are filed by two or more eligible refiners for 
the same royalty oil, the oil will be allocated among such applicants on 
an equitable basis as determined by MMS. Preference eligible refiners 
will be given priority in the allocation procedures in sales and 
subsequent reallocations of royalty oil.
    (d) No eligible refiner shall be awarded contracts for volumes of 
royalty oil that, when added to volumes of other Federal royalty oil 
being received, are in excess of 60 percent of the combined refinery 
capacity of that refiner.
    (e) The MMS may exclude any section 6 lease from a royalty oil sale.
    (f) If two or more eligible refiners are related through common 
ownership or control or otherwise affiliated, only one of them shall be 
entitled to an allotment of royalty oil from a specific sale.
    (g) Any applicant whose refinery is not in operation during the 60-
day period prior to the date of the royalty oil sale shall not be 
entitled to participate in the sale unless such applicant self-certifies 
and demonstrates to the satisfaction of MMS that it will begin 
operations by the first month in which oil becomes available under a 
royalty oil contract. If operations do not begin by that month, MMS will 
terminate the contract.
    (h) Applicants or purchasers that have delinquent balances with MMS 
as of the date of a royalty oil sale or subsequent reallocation will not 
be allowed to participate in that sale or reallocation. If a person 
which is controlled by, in control of, under common control with, or 
otherwise affiliated with an applicant or purchaser has such delinquent 
balances, the applicant or purchaser will not be allowed to participate 
in a royalty oil sale or reallocation. To the extent a purchaser or 
affiliated person has appealed a billing and posted a surety instrument 
in accordance with the contract terms and applicable MMS regulations or 
other law, the balance shall not be considered delinquent.
    (i) A purchaser must meet the eligibility criteria on the date of 
contract issuance. However, a change in a purchaser's eligibility status 
during the term of the contract will not affect the purchaser's right to 
continue that contract until its term expires, including any extensions 
thereof.

[52 FR 41913, Oct. 30, 1987, as amended at 58 FR 64901, Dec. 10, 1993]



Sec. 208.8  Transportation and delivery.

    (a) The lessee shall deliver royalty oil from onshore leases to the 
purchaser at a point on or adjacent to the lease pursuant to the terms 
of the lease. If the purchaser does not have access to its onshore 
royalty oil entitlement at facilities on or adjacent to the lease, the 
operator of the lease must designate an alternate delivery point at no 
additional cost to the purchaser or the Government. The purchaser must 
have physical access to the oil at the alternate delivery point and such 
point must be approved by MMS.
    (b) The lessee shall deliver royalty oil from section 8 offshore 
leases issued after September 1969 at a delivery point to be designated 
by MMS. The lessee shall deliver royalty oil from section 8 offshore 
leases issued before October 1969 or from section 6 leases at a delivery 
point to be designated by the lessee. If the delivery point is on or 
immediately adjacent to the lease, the royalty oil will be delivered 
without cost to the Federal Government as an undivided portion of 
production in marketable condition at pipeline connections or other 
facilities provided by the lessee, unless other arrangements are 
approved by MMS. If the delivery point is not on or immediately adjacent 
to the lease, MMS will reimburse the lessee for the reasonable cost of 
transportation to such point in an amount not to exceed the 
transportation allowance determined pursuant to 30 CFR part 206. The MMS 
will include such transportation costs in the price charged for the oil 
taken in kind to reflect the value of the oil at the delivery point. 
Arrangements for delivery of the royalty oil from, or exchange of the 
oil at, the delivery point, and related transportation costs, are the 
responsibility of the purchaser of the royalty

[[Page 134]]

oil. In addition, quality differentials between the royalty oil to which 
a purchaser is entitled and the oil which is made available at the 
delivery point are matters to be resolved between the purchaser and the 
operator.
    (c) When the purchaser has physical access to the royalty oil at the 
delivery point, the lessee shall deliver such oil in marketable 
condition at pipeline connections or other facilities designated by MMS. 
If the lessee is unable to provide the royalty portion of actual 
production from the lease, the lessee must provide crude oil to the 
purchaser which is equivalent in volume or value to the royalty oil to 
which the purchaser is entitled. The lessee will deliver the royalty oil 
to the purchaser during normal operating hours and in reasonable 
quantities and intervals. The lessee will make available and the 
purchaser will accept delivery of the royalty oil entitlement no later 
than the last day of the calendar month immediately following the 
calendar month in which the oil was produced. Failure to accept 
deliveries shall constitute grounds for the termination of the contract.
    (d) Upon termination of deliveries under a royalty oil contract, the 
transportation allowance and delivery point designation authorized by 
this section no longer will remain in effect.



Sec. 208.9  Agreements.

    (a) A purchaser must submit to MMS two copies of any written third-
party agreements, or two copies of a full written explanation of any 
oral third-party agreements, relating to the method and costs of 
delivery of royalty oil, or crude oil exchanged for the royalty oil, 
from the point of delivery under the contract to the purchaser's 
refinery. In addition, the purchaser must submit copies of agreements 
pertaining to quality differentials which may occur between leases and 
delivery points.
    (b) A purchaser may not sell royalty oil which it purchases pursuant 
to this part except for purposes of an exchange for other crude oil on a 
volume or equivalent value basis.
    (c) Royalty oil purchased under this part, or crude oil received in 
exchange for such royalty oil, must be processed into refined petroleum 
products in the purchaser's refinery.



Sec. 208.10  Notices.

    (a) The MMS shall notify each operator, by certified mail, of the 
Secretary's decision to take royalty oil in kind. This notice shall be 
mailed at least 45 days in advance of the effective date of delivery and 
will specify delivery points for offshore oil for OCS leases issued 
after September 1969.
    (b) Deliveries of royalty oil may be partially terminated only with 
the written approval of the Director, MMS.
    (c) Before terminating the delivery of royalty oil taken in kind, 
MMS, if possible, will notify each operator by certified mail of the 
change in requirements at least 30 days in advance of the effective 
date.
    (d) After MMS notification that royalty oil will be taken in kind, 
the operator shall be responsible for notifying each working interest on 
the Federal lease. As soon as practicable after the date of each royalty 
oil sale, MMS will publish in the Federal Register a notice of the 
leases from which royalty oil will be taken, the purchasers of the 
royalty oil, and the leases from which royalty oil deliveries will be 
discontinued on terminated contracts.
    (e) A purchaser cannot transfer, assign, or sell its rights or 
interest in a royalty oil contract without written approval of the 
Director, MMS. If the purchaser changes ownership or its assets are sold 
or liquidated for any reason, it cannot transfer, assign, or sell its 
rights or interest in the royalty oil contract without written approval 
of the Director, MMS. Without express written consent from MMS for a 
change in ownership, the royalty oil contract shall be terminated. The 
successor company must meet the definition of an eligible refiner in 
Sec. 208.2 of this part for MMS to consider assignment of the royalty 
oil contract.



Sec. 208.11  Surety requirements.

    (a) The eligible purchaser, prior to execution of the contract, 
shall furnish an ``MMS-specified surety instrument,'' in an amount equal 
to the estimated value of royalty oil that could be taken by the 
purchaser in a 99-day period, plus related administrative

[[Page 135]]

charges. The MMS may require the purchaser to increase the amount of the 
surety instrument when necessary to protect the Government's interest or 
may allow the purchaser to decrease the amount of the surety instrument 
where necessary to further the purposes of the Royalty-in-Kind Program.
    (b) If a letter of credit is furnished as the surety instrument, it 
must be effective for a 9-month period beginning the first day the 
royalty oil contract is effective, with a clause providing for automatic 
renewal monthly for a new 9-month period. The purchaser or its surety 
company may elect not to renew the letter of credit at any monthly 
anniversary date, but must notify MMS of its intent not to renew at 
least 30 days prior to the anniversary date. The MMS may grant the 
purchaser 45 days to obtain a new surety instrument. If no replacement 
surety instrument is provided, MMS will terminate the contract effective 
at least 6 months prior to the expiration date of the letter of credit. 
Notwithstanding the above provisions, the letter of credit also may 
contain a clause providing for automatic termination 6 months after the 
royalty oil contract terminates. If a certificate of deposit is 
furnished as the surety instrument, it must be effective for the life of 
the contract plus 6 months after the royalty oil contract terminates.
    (c) For the purposes of this section, an ``MMS-specified surety 
instrument'' means either: an MMS-specified surety bond, an MMS-
specified irrevocable letter of credit, or a financial institution book-
entry certificate of deposit.
    (d) The ``MMS-specified surety instrument'' shall be in a form 
specified by MMS instructions or approved by MMS. A bond must be issued 
by a qualified surety company that has been approved by the Department 
of the Treasury. An irrevocable letter of credit or a certificate of 
deposit must be from a financial institution acceptable to MMS. The MMS 
will use a bank rating service to determine whether a financial 
institution has an acceptable rating to provide a surety instrument 
deemed adequate to indemnify the Government from loss or damage.
    (e) All surety instruments must be in a form acceptable to MMS and 
must include such other specific requirements as MMS may require 
adequately to protect the Government's interests.

[58 FR 64901, Dec. 10, 1993]



Sec. 208.12  Payment requirements.

    (a) All payments to MMS by a purchaser of royalty oil will be due on 
the date and at the location specified in the contract, or, if there is 
no contractual provision, as specified by MMS. The purchaser shall 
tender all payments to MMS in accordance with 30 CFR 218.51. Payments 
made by a payor pursuant to the requirements of paragraph (b) of this 
section and Sec. 208.13 also shall be tendered in accordance with 30 CFR 
218.51.
    (b)(1) Payments from a purchaser of royalty oil not received by MMS 
when due, or that portion of the payment less than the full amount due, 
will be subject to a late payment charge equivalent to an interest 
assessment on the amount past due for the number of days that the 
payment is late at the underpayment rate applicable under section 6621 
of the Internal Revenue Code of 1954.
    (2) The MMS may assess interest to a payor for any underpayments 
which are the result of the payor's late or underreporting, or for 
adjustments reported by the payor, or made as a result of audit, 
reconciliation, or other procedures. The interest for late payment and 
underpayment will be assessed pursuant to 30 CFR 218.54.
    (c) If payment for royalty oil is not received by the due date 
specified in the contract, a notice of nonreceipt will be sent to the 
purchaser by certified mail. If payment is not received by MMS within 15 
days from the date of such notice, MMS may cancel the contract and 
collect under the MMS-specified surety instrument. See Sec. 208.11.
    (d) If the purchaser disagrees with the amount of payment due, it 
must pay the amount due as computed by MMS, unless the purchaser appeals 
the amount and posts an MMS-specified surety instrument pursuant to the 
provisions of 30 CFR part 243. The MMS may, at its discretion, waive the 
appeal surety requirements if it determines that the contract surety 
instrument is

[[Page 136]]

sufficient protection for an amount under appeal.

[52 FR 41913, Oct. 30, 1987, as amended at 64901, Dec. 10, 1993]



Sec. 208.13  Reporting requirements.

    If MMS underbills a purchaser under a royalty oil contract because 
of a payor's underreporting or failure to report on Form MMS-2014 
pursuant to 30 CFR 210.52, the payor will be liable for payment of such 
underbilled amounts plus interest if they are unrecoverable from the 
purchaser or the surety instrument related to the contract.

[58 FR 64902, Dec. 10, 1993]



Sec. 208.14  Civil and criminal penalties.

    Failure to abide by the regulations in this part may result in civil 
and criminal penalties being levied on that person as specified in 
sections 109 and 110 of the Federal Oil and Gas Royalty Management Act 
of 1982, 30 U.S.C. 1719-20, and regulations at 30 CFR part 241. Civil 
penalties applicable under the OCSLA and the Mineral Leasing Act of 1920 
may also be imposed.



Sec. 208.15  Audits.

    Audits of the accounts and books of lessees, operators, payors, and/
or purchasers of royalty oil taken in kind may be made annually or at 
such other times as may be directed by MMS. Such audits will be for the 
purpose of determining compliance with applicable statutes, regulations, 
and royalty oil contracts.



Sec. 208.16  Appeals.

    Except as provided in Sec. 208.12(d) of this part, orders or 
decisions issued under the regulations in this part may be appealed as 
provided in 30 CFR parts 243 and 290.



Sec. 208.17  Suspensions for national emergencies.

    The Secretary of the Department of the Interior, upon a 
recommendation by the Secretary of Defense or the Secretary of Energy 
and with the approval of the President, may suspend operations under 
these regulations and suspend royalty oil contracts during a national 
emergency declared by the Congress or the President.



PART 210--FORMS AND REPORTS--Table of Contents




                      Subpart A--General Provisions

Sec.
210.10  Information collection.

              Subpart B--Oil, Gas, and OCS Sulfur--General

210.50  Required recordkeeping.
210.51  Payor information form.
210.52  Report of sales and royalty remittance.
210.53  Reporting instructions.
210.54  Definitions.
210.55  Special forms or reports.

              Subpart C--Federal and Indian Oil [Reserved]

              Subpart D--Federal and Indian Gas [Reserved]

                   Subpart E--Solid Minerals, General

210.200  Required recordkeeping.
210.201  Solid minerals payor information form.
210.202  Report of sales and royalty remittance--solid minerals.
210.203  Special forms and reports.
210.204  Reporting instructions.

                       Subpart F--Coal [Reserved]

               Subpart G--Other Solid Minerals [Reserved]

                     Subpart H--Geothermal Resources

210.350  Definitions.
210.351  Required recordkeeping.
210.352  Payor information forms.
210.353  Special forms and reports.
210.354  Monthly report of sales and royalty.
210.355  Reporting instructions.

                    Subpart I--OCS Sulfur [Reserved]

    Authority: 5 U.S.C. 301 et seq.; 25 U.S.C. 396 et seq.; 25 U.S.C. 
396a et seq.; 25 U.S.C. 2101 et seq.; 30 U.S.C. 181 et seq.; 30 U.S.C. 
351 et seq.; 30 U.S.C. 1001 et seq.; 30 U.S.C. 1701 et seq.; 31 U.S.C. 
3716 et seq.; 31 U.S.C. 9701; 43 U.S.C. 1301 et seq.; 43 U.S.C. 1331 et 
seq.; and 43 U.S.C. 1801 et seq.


[[Page 137]]





                      Subpart A--General Provisions



Sec. 210.10  Information collection.

    (a) Forms--This section identifies required MMS Royalty Management 
Program forms for reporting sales and royalties, production information, 
claiming a processing or transportation allowance, or claiming a reward 
for providing original information. The information collection 
requirements associated with the forms identified in this section have 
been approved by OMB under 44 U.S.C. 3501 et seq. The forms, filing 
dates, and approved OMB clearance numbers are summarized below:

------------------------------------------------------------------------
               Form No., name, and filing date                  OMB No. 
------------------------------------------------------------------------
MMS-2014--Report of Sales and Royalty Remittance--Due by the            
 end of first month following production month for royalty              
 payment and for rentals no later than anniversary date of              
 the lease..................................................   1010-0022
MMS-3160--Monthly Report of Operations--Due by the 15th day             
 of the second month following the production month.........   1010-0040
MMS-4025--Oil and Gas Payor Information Form--Due 30 days               
 after issuance of a new lease or change to an existing                 
 lease......................................................   1010-0033
MMS-4030--Solid Minerals Payor Information Form--Due 30 days            
 after issuance of a new lease or change to an existing                 
 account established by an earlier form.....................   1010-0064
MMS-4051--Facility and Measurement Information Form and                 
 Supplement--Due at the request of MMS during the initial               
 conversion of the facility and measurement device operators   1010-0040
MMS-4053--First Purchaser Report--Due at the request of MMS.   1010-0040
MMS-4054--Oil and Gas Operations Report--Due by the 15th day            
 of the second month following the production month.........   1010-0040
MMS-4055--Gas Analysis Report--Due by the 15th day of the               
 second month following the production month................   1010-0040
MMS-4056--Gas Plant Operations Report--Due by the 15th day              
 of the second month following the production month.........   1010-0040
MMS-4058--Production Allocation Schedule Report--Due by the             
 15th day of the second month following the production month   1010-0040
MMS-4059--Solid Minerals Operation Report--Due by the 15th              
 day of the second month following the production month.....   1010-0063
MMS-4060--Solid Minerals Facility Report--Due by the 15th               
 day of the second month following the production month.....   1010-0063
MMS-4070--Application of the Purchase of Royalty Oil--Due               
 prior to the date of sale in accordance with the                       
 instructions in the Notice of Availability of Royalty Oil..   1010-0042
MMS-4109--Gas Processing Allowance Summary Report--Initial              
 report due within 3 months following the last day of the               
 month for which an allowance is first claimed, unless a                
 longer period is approved by MMS...........................   1010-0075
MMS-4110--Oil Transportation Allowance Report--Initial                  
 report due within 3 months following the last day of the               
 month for which an allowance is first claimed, unless a                
 longer period is approved by MMS...........................   1010-0061
MMS-4280--Application for Reward for Original Information--             
 Due when a reward is claimed for information provided which            
 may lead to the recovery of royalty or other payments owed             
 to the United States.......................................   1010-0076
MMS-4292--Coal Washing Allowance Report--Due prior to or at             
 the same time that the allowance is first reported on Form             
 MMS-2014 and annually thereafter if the allowance does not             
 change.....................................................   1010-0074
MMS-4293--Coal Transportation Allowance Report--Due prior to            
 or at the same time that the allowance is first reported on            
 Form MMS-2014 and annually thereafter if the allowance does            
 not change.................................................   1010-0074
MMS-4295--Gas Transportation Allowance Report--Initial                  
 report due within 3 months following the last day of month             
 for which an allowance is first claimed unless a longer                
 period is approved by MMS..................................   1010-0075
MMS-4377--Stripper Royalty Rate Reduction Notification--Due             
 for each 12-month qualifying period that a reduced royalty             
 rate is granted by the Bureau of Land Management...........   1010-0090
------------------------------------------------------------------------


The information required on the forms identified in the table above is 
being collected by the Department of the Interior to meet its 
congressionally mandated accounting and auditing responsibilities 
relating to Federal and Indian mineral royalty management. The purpose 
of the forms and the estimated public reporting burden associated with 
each form are described in paragraph (c) of this section. With the 
exception of Forms MMS-4109, MMS-4110, MMS-4280, MMS-4292, MMS-4293, and 
MMS-4295, the forms are mandatory. Information on Forms MMS-4109, MMS-
4110, MMS-4292, MMS-4293, and MMS-4295 is required to receive a benefit. 
Information required on Form MMS-4280 must be provided voluntarily to 
claim a reward. Information collected relative to production, royalties, 
and other payments due the Government from activities on leased Federal 
or Indian land is authorized by the Federal Oil and Gas Royalty 
Management Act of 1982, 30 U.S.C. 1701 et seq. for oil and gas 
production, and by 30 U.S.C. 189, 30 U.S.C. 359, and 30 U.S.C. 396d for 
solid mineral production.
    (b) MMS mailing addresses--This paragraph identifies the MMS 
address(es) to be used for requesting forms and/or for mailing completed 
forms to MMS.

[[Page 138]]

    (1) Requests for Forms MMS-2014 or MMS-4070 should be addressed to 
the Minerals Management Service, Royalty Management Program, P.O. Box 
5760, Denver, Colorado 80217-5760. The completed Form MMS-2014 should be 
mailed to the Minerals Management Service, Royalty Management Program, 
P.O. Box 5810, Denver, Colorado 80217-5810. The address to which a 
completed Form MMS-4070 should be mailed will be identified in a Federal 
Register Notice of Availability of Royalty Oil. (See 30 CFR 208.5.)
    (2) Requests for Forms MMS-4025 or MMS-4030 should be addressed to 
the Minerals Management Service, Royalty Management Program, P.O. Box 
5760, Denver, Colorado 80217-5760. The completed forms should be mailed 
to the same address.
    (3) Requests for Forms MMS-3160, MMS-4051, MMS-4052, MMS-4053, MMS-
4054, MMS-4055, MMS-4056, MMS-4057, MMS-4058, MMS-4059, MMS-4060, or 
MMS-4061 should be addressed to the Minerals Management Service, Royalty 
Management Program, P.O. Box 17110, Denver, Colorado 80217-0110. The 
completed forms should be mailed to the same address.
    (4) Requests for processing or transportation allowance forms (Forms 
MMS-4109, MMS-4110, MMS-4292, MMS-4293, or MMS-4295) should be addressed 
to the Minerals Management Service, Royalty Management Program, P.O. Box 
25165, Denver, Colorado 80225-0165. The completed allowance forms should 
be mailed to the Minerals Management Service, Royalty Management 
Program, P.O. Box 5200, Denver, Colorado 80217-5200.
    (5) Requests for Form MMS-4280 should be addressed to the Minerals 
Management Service, Royalty Management Program, P.O. Box 25165, Denver, 
Colorado 80225-0165. The completed form should be mailed to the same 
address. (See 30 CFR 218.57(b)).
    (6) Reports delivered to MMS by special couriers or overnight mail 
shall be addressed as follows: Minerals Management Service, Royalty 
Management Program, Building 85, Denver Federal Center, room A-212, 
Denver, Colorado 80225.
    (c) Purpose of forms and estimated public reporting burden--This 
paragraph describes the purpose of the information being collected and 
the estimated public reporting burden associated with the OMB approved 
forms identified in paragraph (a) of this section.
    (1) MMS-2014--Used monthly to report lease-related transactions 
essential for royalty management to determine the correct royalty amount 
due, reconcile or audit data, and distribute payments to appropriate 
accounts. Public reporting burden is estimated to average 7 minutes to 
complete each line item on the form, including the time necessary to 
assemble data, calculate value and royalty, and enter data on the form. 
Companies with equipment enabling them to report using tape media may 
average 3 minutes to complete each line item on the form. Comments 
submitted relative to this information collection should reference 
Paperwork Reduction Project 1010-0022.
    (2) MMS-3160--Used by onshore oil and gas lease operators to report 
monthly oil and gas production to MMS. Public reporting burden is 
estimated to average 15 minutes per form including time spent reading 
instructions, completing, and mailing the form. Comments submitted 
relative to this information collection should reference Paperwork 
Reduction Project 1010-0040.
    (3) MMS-4025--This form is used to establish a data base of payor 
accounts for oil and gas leases on Federal or Indian lands, reporting 
changes in payor accounts, and notifying MMS of the products on which 
royalties will be paid. Public reporting burden is estimated to average 
30 minutes per form, including time spent reading instructions, 
completing, and mailing the form. Comments submitted relative to this 
information collection should reference Paperwork Reduction Project 
1010-0033.
    (4) MMS-4030--This form is used to establish a data base of payor 
accounts for solid mineral leases on Federal or Indian lands, reporting 
any changes to the accounts, and identifying the type of mine and 
product produced. Public reporting burden is estimated to average 30 
minutes per form, including

[[Page 139]]

time spent reading instructions, completing, and mailing the form. 
Comments submitted relative to this information collection should 
reference Paperwork Reduction Project 1010-0064.
    (5) MMS-4051--Used to establish a reference data base identifying 
the facilities where oil and gas production is stored or processed and 
the metering points where production is measured for sale or transfer. 
Public reporting burden is estimated to average 30 minutes per form for 
facility operators to review and update the data base. Comments 
submitted relative to this information collection should reference 
Paperwork Reduction Project 1010-0040.
    (6) MMS-4053--Designed as an audit tool to be used to confirm sales 
data. Public reporting burden is estimated to average 30 minutes per 
form, including time spent reading instructions, completing, and mailing 
the form. Comments submitted relative to this information collection 
should reference Paperwork Reduction Project 1010-0040.
    (7) MMS-4054--This three-part form identifies all oil and gas lease 
production from Federal and Indian lands. The MMS uses information from 
this form to track oil and gas from the point of production to the point 
of first sale or other disposition. Respondents will generally not use 
all three parts of the form. Public reporting burden is estimated to 
average 30 minutes per month, including time gathering data, completing, 
and mailing the form. Comments submitted relative to this information 
collection should reference Paperwork Reduction Project 1010-0040.
    (8) MMS-4055--This report identifies the separate components of 
natural gas production. It is submitted quarterly or semiannually by 
lease operators when gas production is processed before royalty value 
has been determined. Public reporting burden is estimated to average 15 
minutes per form including time required gathering data, completing, and 
mailing the form. Comments submitted relative to this information 
collection should reference Paperwork Reduction Project 1010-0040.
    (9) MMS-4056--Submitted monthly by gas plant operators to identify 
components and disposition of natural gas from Federal and Indian 
leases. Public reporting burden is estimated to average 30 minutes per 
form, including time required gathering data, completing, and mailing 
the form. Comments submitted relative to this information collection 
should reference Paperwork Reduction Project 1010-0040.
    (10) MMS-4058--Submitted monthly by operators of the facilities and 
measurement points where production from a Federal or Indian lease is 
commingled with production from other sources before it is measured for 
royalty determination. The data reported is used to determine whether 
sales reported by lessees are reasonable. Public reporting burden is 
estimated to average 15 minutes per form, including time required 
gathering data, completing, and mailing the form. Comments submitted 
relative to this information collection should reference Paperwork 
Reduction Project 1010-0040.
    (11) MMS-4059--This form consists of parts A and B. It is submitted 
by all operators of Federal or Indian solid mineral leases on a schedule 
established on the lease. Public reporting burden is estimated to range 
from 30 minutes per form for the majority of operators who submit only 
part A to report production and disposition of raw materials, to 1.25 
hours for operators submitting both parts A and B to report sales of 
mine production from a facility beyond the mine site. Comments submitted 
relative to this information collection should reference Paperwork 
Reduction Project 1010-0063.
    (12) MMS-4060--Submitted by operators of secondary processing or 
remote storage facilities that handle solid mineral production on which 
royalties have not been determined. The form is usually submitted 
monthly and requires 1 to 2 hours to complete depending on the 
processes, inventory, and production disposition to be reported. 
Comments submitted relative to this information collection should 
reference Paperwork Reduction Project 1010-0063.
    (13) MMS-4070--After publication in the Federal Register of a Notice 
of Availability of Royalty Oil, refiners interested in the purchase of 
royalty oil should submit their applications using this form. The 
information collected is used by MMS to determine if the applicant meets 
eligibility requirements to

[[Page 140]]

contract to purchase the oil. Public reporting burden is estimated to 
average 1 hour per form, including time required gathering data, 
completing, and mailing the form. Comments submitted relative to this 
information collection should reference Paperwork Reduction Project 
1010-0042.
    (14) MMS-4109--Used to claim an allowance for the reasonable, actual 
costs of removing hydrocarbon and nonhydrocarbon elements or compounds 
from the gas streams. Public reporting burden varies depending on the 
type of contract involved. Under an arm's-length contract, burden is 
estimated to average 1 hour for the submission of page 1 and schedule 1 
of the form requiring the lessee's name and address, payor code, plant 
name, accounting identification number, product code, and selling 
arrangement. Nonarm's-length contract claims require completion of all 
pages of the form including calculations of allowable operating and 
maintenance costs, overhead, depreciation, and return on undepreciated 
capital investment. Public reporting burden is estimated to average 10 
hours to complete the entire form. Comments submitted relative to this 
information collection should reference Paperwork Reduction Project 
1010-0075.
    (15) MMS-4110--Used to claim an allowance for expenses incurred by a 
lessee in transporting oil from the lease site to a point remote from 
the lease where value is determined. Public reporting burden varies 
depending on the type of contract involved. Under an arm's-length 
contract, burden is estimated to average 2 hours for the submission of 
page 1 and schedule 1 of the form requiring the lessee's name and 
address, payor code, accounting identification number, product code, and 
selling arrangement. Nonarm's-length contract claims require completion 
of all pages of the form including calculations of allowable operating 
and maintenance costs, overhead, depreciation, and return on 
undepreciated capital investment. Public reporting burden is estimated 
to average 5 hours to complete the entire form. Comments submitted 
relative to this information collection should reference Paperwork 
Reduction Project 1010-0061.
    (16) MMS-4280--This form is used to claim a reward for information 
leading to the recovery of payments owed to the United States from oil 
and gas leases on Federal land or the Outer Continental Shelf. Claimants 
must provide name, address, Social Security number, and a brief 
description of the violation being reported. Public reporting burden is 
estimated to average 30 minutes to complete this form. Comments 
submitted relative to this information collection should reference 
Paperwork Reduction Project 1010-0076.
    (17) MMS-4292--This form is used to claim an allowance for the 
reasonable, actual costs incurred to wash coal. Public reporting burden 
varies depending on the type of contract involved. Under an arm's-length 
contract, burden is estimated to average 1 hour for the submission of 
page 1 of the form requiring the lessee's name and address, payor code, 
accounting identification number, product code, and selling arrangement. 
Nonarm's-length contract claims require completion of all pages of the 
form including calculations of allowable operating and maintenance 
costs, overhead, depreciation, and return on undepreciated capital 
investment. Public reporting burden is estimated to average 40 hours to 
complete the entire form. Comments submitted relative to this 
information collection should reference Paperwork Reduction Project 
1010-0074.
    (18) MMS-4293--Used to claim an allowance for the reasonable, actual 
costs of transporting coal to a sales point or a washing facility remote 
from the mine or lease. Public reporting burden varies depending on the 
type of contract involved. Under an arm's-length contract, burden is 
estimated to average 1 hour for the submission of page 1 of the form 
requiring the lessee's name and address, payor code, accounting 
identification number, product code, and selling arrangement. Nonarm's-
length contract claims require completion of all pages of the form 
including calculations of allowable operating and maintenance costs, 
overhead, depreciation, and return on undepreciated capital investment. 
Public reporting burden is estimated to average 40 hours to complete the 
entire form. Comments submitted relative to

[[Page 141]]

this information collection should reference Paperwork Reduction Project 
1010-0074.
    (19) MMS-4295--This form is used to claim an allowance for the 
reasonable, actual costs of transporting gas from the lease to the point 
of first sale. Public reporting burden varies depending on the type of 
contract involved. Under an arm's-length contract, burden is estimated 
to average 1 hour for the submission of page 1 and schedule 1 of the 
form requiring the lessee's name and address, payor code, accounting 
identification number, product code, and selling arrangement. Nonarm's-
length contract claims require completion of all pages of the form 
including calculations of allowable operating and maintenance costs, 
overhead, depreciation, and return on undepreciated capital investment. 
Public reporting burden is estimated to average 3 hours to complete the 
entire form. Comments submitted relative to this information collection 
should reference Paperwork Reduction Project 1010-0075.
    (20) MMS-4377--This form must be submitted by operators of stripper 
oil properties to notify MMS of reduced royalty rates granted by the 
Bureau of Land Management under 43 CFR 3103.4-1 for each 12-month 
qualifying period. Reporting burden is estimated to require an average 
of 30 minutes per form to supply the operator name, lease and agreement 
numbers, calculated and current royalty rate, and the period covered. 
Comments submitted relative to this information collection should 
reference Paperwork Reduction Project 1010-0090.
    (d) Comments on burden estimates. Send comments regarding the burden 
estimates or any other aspect of these information collections, 
including suggestions for reducing burden, to the Information Collection 
Clearance Officer, Minerals Management Service, 381 Elden Street, 
Herndon, VA 22070; and to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Paperwork Reduction Project 
1010-XXXX, Washington, DC 20503.

[57 FR 41864, Sept. 14, 1992]



              Subpart B--Oil, Gas, and OCS Sulfur--General

    Authority: The Federal Oil and Gas Royalty Management Act of 1982 
(30 U.S.C. 1701 et seq.).

    Source: 49 FR 37345, Sept. 21, 1984, unless otherwise noted.



Sec. 210.50  Required recordkeeping.

    Information required by the MMS shall be filed using the forms 
prescribed in this subpart, which are available from MMS. Records may be 
maintained in microfilm, microfiche, or other recorded media that is 
easily reproducible and readable.



Sec. 210.51  Payor information form.

    The Payor Information Form (Form MMS-4025) must be filed for each 
Federal or Indian lease on which royalties are paid. Where specifically 
determined by MMS, Form MMS-4025 is also required for all Federal leases 
on which rent is due. The completed form must be filed by the party who 
is making the rent or royalty payment (payor) for each revenue source. 
Form MMS-4025 must be filed no later than 30 days after issuance of a 
new lease or a modification to an existing lease which changes the 
paying responsibility on the lease.



Sec. 210.52  Report of sales and royalty remittance.

    A completed Report of Sales and Royalty Remittance (Form MMS-2014) 
must accompany all payments to MMS for royalties and, where specified, 
for rents on nonproducing leases. Payors who submit Form MMS-2014 data 
on magnetic tape will not be required to submit the form itself. 
Completed Form MMS-2014's (or magnetic tape) for royalty payments 
including those covering payments by electronic funds transfer, are due 
by the end of the month following the production month. Where 
applicable, completed Form MMS-2014's for rental payments are due no 
later than the anniversary date of the lease. This section does not 
prohibit payors from making early payments voluntarily.

[[Page 142]]



Sec. 210.53  Reporting instructions.

    (a) Specific guidance on how to prepare and submit required 
information collection reports and forms to MMS is contained in an MMS 
``Oil and Gas Payor Handbook,'' a ``Production Accounting and Auditing 
System Reporter Handbook,'' and a ``PAAS Onshore Oil and Gas Reporter 
Handbook.'' The Payor Handbook is available from the Minerals Management 
Service, Royalty Management Program, P.O. Box 5760, Denver, Colorado 
80217-5760. The Reporter Handbooks are available from the Minerals 
Management Service, Royalty Management Program, P.O. Box 17110, Denver, 
Colorado 80217-0110.
    (b) Royalty payors or production reporters should refer to these 
handbooks for specific guidance with respect to oil and gas reporting 
requirements. If additional information is required, the payor or 
reporter should contact the MMS at the above address. The appropriate 
telephone numbers are listed in the handbooks.

[51 FR 45882, Dec. 23, 1986, as amended at 53 FR 16412, May 9, 1988; 57 
FR 41867, Sept. 14, 1992; 58 FR 64902, Dec. 10, 1993]



Sec. 210.54  Definitions.

    Terms used in this subpart shall have the same meaning as in 30 
U.S.C. 1702.

[49 FR 37345, Sept. 21, 1984. Redesignated at 51 FR 45882, Dec. 23, 
1986]



Sec. 210.55  Special forms or reports.

    When special forms or reports other than those referred to in the 
regulations in this part may be necessary, instructions for the filing 
of such forms or reports will be given by MMS.

[53 FR 1226, Jan. 15, 1988]



              Subpart C--Federal and Indian Oil [Reserved]



              Subpart D--Federal and Indian Gas [Reserved]



                   Subpart E--Solid Minerals, General

    Source: 51 FR 15766, Apr. 28, 1986, unless otherwise noted.



Sec. 210.200  Required recordkeeping.

    Information required by the Minerals Management Service (MMS) shall 
be filed using the forms prescribed in this subpart, copies of which are 
available from MMS. Instructions on the completion of these forms are 
provided in the Payor Handbook--Solid Minerals, also available from MMS. 
Records and supporting data may be maintained in hardcopy, microfilm, 
microfiche, or other recorded media that is readily available and 
readable.



Sec. 210.201  Solid minerals payor information form.

    A Solid Minerals Payor Information Form (Form MMS-4030) must be 
submitted to MMS for each Federal and Indian solid minerals lease on 
which royalties, rentals or minimum royalties are paid. This form does 
not change any requirement for a separate approval, if required, by the 
Department of the Interior. The Form MMS-4030 shall identify the payor 
of rent, minimum royalty, advance royalty and production royalty, and 
identify revenue sources and selling arrangements for all lease 
products. The completed form must be filed by each royalty payor no 
later than 30 days after MMS provides notice that the payor is converted 
to the Auditing and Financial System (AFS). After filing the initial 
form, a new Form MMS-4030 must be filed no later than 30 days after the 
occurrence of any of the following:
    (a) Assignment of all or any part of the lease;
    (b) Adoption of a new mining method;
    (c) Production of a new product;
    (d) A change in a selling arrangement;
    (e) Change in royalty rate;
    (f) Change of payor; or
    (g) Abandonment of a lease.



Sec. 210.202  Report of sales and royalty remittance--solid minerals.

    A completed Report of Sales and Royalty Remittance (Form MMS-2014) 
must accompany all payments to MMS for rents (other than first year) and 
royalties for Federal and Indian solid minerals leases. On leases where 
payment is remitted directly to an Indian tribe or Bureau of Indian 
Affairs office, the payor also must send a completed

[[Page 143]]

form MMS-2014 to MMS for processing in AFS. The Form MMS-2014 shall 
identify the payor and the lease subaccounts, contain production, sales, 
and royalty data, and identify the time period applicable to the data. 
Completed forms are due at the end of the month following the production 
or sales period as applicable. Unless the lease terms specify a 
different royalty payment frequency, all reports and payments are due 
monthly. If the lease terms do specify a different frequency for 
payment, the reporting must coincide with the payment. The Form MMS-2014 
for rental payments is due no later than the rental payment date 
specified in the lease terms.

[51 FR 15766, Apr. 28, 1986, as amended at 57 FR 52720, Nov. 5, 1992]



Sec. 210.203  Special forms and reports.

    The MMS may require submission of additional information on special 
forms or reports. When special forms or reports other than those 
referred to in this subpart are necessary, instructions for the filing 
of such forms or reports will be given by MMS. Requests for the 
submission of such forms will be made in conformity with the 
requirements of the Paperwork Reduction Act of 1980 and other applicable 
laws.



Sec. 210.204  Reporting instructions.

    (a) Specific guidance on how to prepare and submit required 
information collection reports and forms to MMS is contained in an ``MMS 
Payor Handbook--Solid Minerals'' and a ``Production Accounting and 
Auditing System Reporter Handbook.'' The Payor Handbook is available 
from the Minerals Management Service, Royalty Management Program, P.O. 
Box 5760, Denver, Colorado 80217-5760. The Reporter Handbook is 
available from the Minerals Management Service, Royalty Management 
Program, P.O. Box 17110, Denver, Colorado 80217-0110.
    (b) Royalty payors or production reporters should refer to these 
handbooks for specific guidance with respect to solid minerals reporting 
requirements. If additional information is required, the payor or 
reporter should contact the MMS at the above address. The appropriate 
telephone numbers are listed in the handbooks.

[51 FR 45883, Dec. 23, 1986, as amended at 57 FR 41867, Sept. 14, 1992; 
58 FR 64902, Dec. 10, 1993]



                       Subpart F--Coal [Reserved]



               Subpart G--Other Solid Minerals [Reserved]



                     Subpart H--Geothermal Resources

    Source: 56 FR 57286, Nov. 8, 1991, unless otherwise noted.



Sec. 210.350  Definitions.

    Terms used in this subpart shall have the same meaning as in 30 CFR 
206.351.



Sec. 210.351  Required recordkeeping.

    Information required by MMS shall be filed using the forms 
prescribed in this subpart, which are available from MMS. Records may be 
maintained on microfilm, microfiche, or other recorded media that are 
easily reproducible and readable. See subpart H of 30 CFR part 212.



Sec. 210.352  Payor information forms.

    The Payor Information Form (Form MMS-4025) must be filed for each 
Federal lease on which geothermal royalties (including byproduct 
royalties) are paid. Where specifically determined by MMS, Form MMS-4025 
is also required for all Federal leases on which rent is due. The 
completed form must be filed by the party who is making the rent or 
royalty payment (payor) for each revenue source. Form MMS-4025 must be 
filed no later than 30 days after issuance of a new lease or a 
modification to an existing lease that changes the paying responsibility 
on the lease. The Form MMS-4025 shall identify the payor of production 
royalty, and identify revenue sources and selling arrangements for all 
leased geothermal resources (including byproducts). After filing the 
initial form, a new Form MMS-4025 must be filed no later than 30 days 
after the occurrence of any of the following:
    (a) Assignment of all or any part of the lease;

[[Page 144]]

    (b) Production of new product;
    (c) A change in a selling arrangement;
    (d) Change in royalty rate;
    (e) Change of payor; or
    (f) Abandonment of a lease.



Sec. 210.353  Special forms and reports.

    The MMS may require submission of additional information on special 
forms or reports. When special forms or reports other than those 
referred to in this subpart are necessary, MMS will give instructions 
for the filing of such forms or reports. Requests for the submission of 
such forms will be made in conformity with the requirements of the 
Paperwork Reduction Act of 1980 and other applicable laws.



Sec. 210.354  Monthly report of sales and royalty.

    A completed Report of Sales and Royalty Remittance (Form MMS-2014) 
must be submitted each month once sales or utilization of production 
occur, even though sales may be intermittent, unless otherwise 
authorized by MMS. This report is due on or before the last day of the 
month following the month in which production was sold or utilized, 
together with the royalties due the United States.



Sec. 210.355  Reporting instructions.

    (a) Specific guidance on how to prepare and submit required 
information collection reports and forms to MMS is contained in an MMS 
Oil and Gas Payor Handbook which is available from the Minerals 
Management Service, Royalty Management Program, P.O. Box 5760, Denver, 
Colorado 80217-5760.
    (b) Royalty payors should refer to this handbook for specific 
guidance with respect to geothermal resources reporting requirements. If 
additional information is required, the payor should contact the MMS at 
the above address. The appropriate telephone numbers are listed in the 
handbook.

[56 FR 57286, Nov. 8, 1991, as amended at 58 FR 64902, Dec. 10, 1993]



                    Subpart I--OCS Sulfur [Reserved]



PART 212--RECORDS AND FILES MAINTENANCE--Table of Contents




                Subpart A--General Provisions [Reserved]

              Subpart B--Oil, Gas, and OCS Sulphur--General

Sec.
212.50  Required recordkeeping and reports.
212.51  Records and files maintenance.
212.52  Definitions.

              Subpart C--Federal and Indian Oil [Reserved]

              Subpart D--Federal and Indian Gas [Reserved]

                   Subpart E--Solid Minerals--General

212.200  Maintenance of and access to records.

                       Subpart F--Coal [Reserved]

               Subpart G--Other Solid Minerals [Reserved]

                     Subpart H--Geothermal Resources

212.350  Definitions.
212.351  Required recordkeeping and reports.

                    Subpart I--OCS Sulfur [Reserved]

    Authority: 5 U.S.C. 301 et seq.; 25 U.S.C. 396 et seq.; 25 U.S.C. 
396a et seq.; 25 U.S.C. 2101 et seq.; 30 U.S.C. 181 et seq.; 30 U.S.C. 
351 et seq.; 30 U.S.C. 1001 et seq.; 30 U.S.C. 1701 et seq.; 31 U.S.C. 
9701; 43 U.S.C. 1301 et seq.; 43 U.S.C. 1331 et seq.; and 43 U.S.C. 1801 
et seq.



                Subpart A--General Provisions [Reserved]



              Subpart B--Oil, Gas, and OCS Sulphur--General



Sec. 212.50  Required recordkeeping and reports.

    All records pertaining to offshore and onshore Federal and Indian 
oil and gas leases shall be maintained by a lessee, operator, revenue 
payor, or other person for 6 years after the records are generated 
unless the recordholder is notified, in writing, that records must

[[Page 145]]

be maintained for a longer period. When an audit or investigation is 
underway, records shall be maintained until the recordholder is released 
by written notice of the obligation to maintain records.

[49 FR 37345, Sept. 21, 1984]



Sec. 212.51  Records and files maintenance.

    (a) Records. Each lessee, operator, revenue payor, or other person 
shall make and retain accurate and complete records necessary to 
demonstrate that payments of rentals, royalties, net profit shares, and 
other payments related to offshore and onshore Federal and Indian oil 
and gas leases are in compliance with lease terms, regulations, and 
orders. Records covered by this section include those specified by lease 
terms, notices and orders, and by the various parts of this chapter. 
Records also include computer programs, automated files, and supporting 
systems documentation used to produce automated reports or magnetic tape 
submitted to the Minerals Management Service (MMS) for use in its 
Auditing and Financial System (AFS) and Production Accounting and 
Auditing System (PAAS).
    (b) Period for keeping records. Lessees, operators, revenue payors, 
or other persons required to keep records under this section shall 
maintain and preserve them for 6 years from the day on which the 
relevant transaction recorded occurred unless the Secretary notifies the 
record holder of an audit or investigation involving the records and 
that they must be maintained for a longer period. When an audit or 
investigation is underway, records shall be maintained until the 
recordholder is released in writing from the obligation to maintain the 
records. Lessees, operators, revenue payors, or other persons shall 
maintain the records generated during the period for which they have 
paying or operating responsibility on the lease for a period of 6 years.
    (c) Inspection of records. The lessee, operator, revenue payor, or 
other person required to keep records shall be responsible for making 
the records available for inspection. Records shall be provided at a 
business location of the lessee, operator, revenue payor, or other 
person during normal business hours upon the request of any officer, 
employee or other party authorized by the Secretary. Lessees, operators, 
revenue payors, and other persons will be given a reasonable period of 
time to produce historical records.

[49 FR 37345, Sept. 21, 1984; 49 FR 40576, Oct. 17, 1984]



Sec. 212.52  Definitions.

    Terms used in this subpart shall have the same meaning as in 30 
U.S.C. 1702.

[49 FR 37345, Sept. 21, 1984]



              Subpart C--Federal and Indian Oil [Reserved]



              Subpart D--Federal and Indian Gas [Reserved]



                   Subpart E--Solid Minerals--General



Sec. 212.200  Maintenance of and access to records.

    (a) All records pertaining to Federal and Indian solid minerals 
leases shall be maintained by a lessee, operator, revenue payor, or 
other person for 6 years after the records are generated unless the 
record holder is notified, in writing, that records must be maintained 
for a longer period. When an audit or investigation is underway, records 
shall be maintained until the record holder is released by written 
notice of the obligation to maintain records.
    (b) The MMS shall have access to all records of the operator/lessee 
pertaining to compliance to Federal royalties, including, but not 
limited to:
    (1) Qualities and quantities of all products mined, processed, sold, 
delivered, or used by the operator/lessee.
    (2) Prices received for mined or processed products, prices paid for 
like or similar products, and internal transfer prices.
    (3) Costs of mining, processing, handling, and transportation.

[47 FR 33193, July 30, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983, 
and amended at 51 FR 15767, Apr. 28, 1986; 54 FR 1532, Jan. 13, 1989]

[[Page 146]]



                       Subpart F--Coal [Reserved]



               Subpart G--Other Solid Minerals [Reserved]



                     Subpart H--Geothermal Resources

    Source: 56 FR 57286, Nov. 8, 1991, unless otherwise noted.



Sec. 212.350  Definitions.

    Terms used in this subpart shall have the same meaning as in 30 CFR 
206.351.



Sec. 212.351  Required recordkeeping and reports.

    (a) Records. Each lessee, operator, revenue payor, or other person 
shall make and retain accurate and complete records necessary to 
demonstrate that payments of royalties, rentals, and other amounts due 
under Federal geothermal leases are in compliance with laws, lease 
terms, regulations, and orders. Records covered by this section include 
those specified by lease terms, notices, and orders, and those 
identified in paragraph (c) of this section. Records also include 
computer programs, automated files, and supporting systems documentation 
used to produce automated reports or magnetic tapes submitted to MMS for 
use in its AFS, or in its Production Accounting and Auditing System.
    (b) Period for keeping records. All records pertaining to Federal 
geothermal leases shall be maintained by a lessee, operator, revenue 
payor, or other person for 6 years after the records are generated 
unless the recordholder is notified, in writing, before the expiration 
of that 6-year period that records must be maintained for a longer 
period for purposes of audit or investigation. When an audit or 
investigation is underway, records shall be maintained until the 
recordholder is released by written notice of the obligation to maintain 
records.
    (c) Access to records. The Associate Director for Royalty Management 
shall have access to all records in the possession of the lessee, 
operator, revenue payor, or other person pertaining to compliance with 
royalty obligations under Federal geothermal leases (regardless of 
whether such records were generated more than 6 years before a request 
or order to produce them and they otherwise were not disposed of), 
including, but not limited to:
    (1) Qualities and quantities of all products extracted, processed, 
sold, delivered, or used by the operator/lessee;
    (2) Prices received for products, prices paid for like or similar 
products, and internal transfer prices; and
    (3) Costs of extraction, power generation, electrical transmission, 
and byproduct transportation.
    (d) Inspection of Records. The lessee, operator, revenue payor, or 
other person required to keep records shall be responsible for making 
the records available for inspection. Records shall be made available at 
a business location of the lessee, operator, revenue payor, or other 
person during normal business hours upon the request of any officer, 
employee, or other party authorized by the Secretary. Lessees, 
operators, revenue payors, and other persons will be given a reasonable 
period of time to produce records.



                    Subpart I--OCS Sulfur [Reserved]



PART 215--ACCOUNTING AND AUDITING STANDARDS [RESERVED]






PART 216--PRODUCTION ACCOUNTING--Table of Contents




                      Subpart A--General Provisions

Sec.
216.1  Purpose.
216.2  Scope.
216.6  Definitions.
216.10  Information collection.
216.15  Reporting instructions.
216.16  Where to report.
216.20  Applicability.
216.21  General obligations of the reporter.
216.25  Confidentiality.
216.30  Special forms and reports.
216.40  Assessments for incorrect or late reports and failure to report.

                     Subpart B--Oil and Gas, General

216.50  Monthly report of operations.
216.51  Facility and Measurement Information Form.
216.52  First Purchaser Report.
216.53  Oil and Gas Operations Report.
216.54  Gas Analysis Report.
216.55  Gas Plant Operations Report.

[[Page 147]]

216.56  Production Allocation Schedule Report.
216.57  Stripper royalty rate reduction notification.

               Subpart C--Oil and Gas, Onshore [Reserved]

          Subpart D--Oil, Gas, and Sulphur, Offshore [Reserved]

                   Subpart E--Solid Minerals, General

216.200  [Reserved]
216.201  Mine Information Report.
216.202  Facility and Measurement Information Form.
216.203  Solid Minerals Operations Report.
216.204  Solid Minerals Facility Report.

                       Subpart F--Coal [Reserved]

               Subpart G--Other Solid Minerals [Reserved]

               Subpart H--Geothermal Resources [Reserved]

                    Subpart I--Indian Land [Reserved]

    Authority: 5 U.S.C. 301 et seq.; 25 U.S.C. 396 et seq., 396a et 
seq., 2101 et seq.; 30 U.S.C. 181 et seq., 351 et seq., 1001 et seq., 
1701 et seq.; 31 U.S.C. 3716, 3720A, 9701; 43 U.S.C. 1301 et seq., 1331 
et seq., 1801 et seq.

    Source: 51 FR 8175, Mar. 7, 1986, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 216.1  Purpose.

    The purpose of this part is to ensure that the Federal Government 
receives proper information regarding energy and mineral resources 
removed from Federal and Indian leases and federally approved 
agreements, including the Outer Continental Shelf (OCS).



Sec. 216.2  Scope.

    This part governs the reporting of oil, gas, and solid minerals 
operations information on Federal and Indian leases or federally-
approved agreements including leases or agreements on the OCS. This part 
also governs the reporting of other operational information associated 
with production from Federal and Indian leases or federally-approved 
agreements when such operations occur prior to the point of sale or 
royalty determination, whichever is applicable. Reporters are required 
to submit certain production reports to MMS as set forth in this part.

[58 FR 45254, Aug. 27, 1993]



Sec. 216.6  Definitions.

    For purposes of this part:
    Agreement means a binding arrangement between two or more parties 
purporting to the act of agreeing or of coming to a mutual arrangement 
that is accepted by all parties to a transaction (e.g., 
communitizations, unitization, gas storage, or compensatory royalty 
agreements.).
    Alaska Native Corporation means a corporation created pursuant to 
the provisions of the Alaska Native Claims Settlement Act (43 U.S.C. 
1601 et seq.).
    Approved mining plan as used in this part means an approved resource 
recovery and protection plan (43 CFR 3480.5) or approved mining plan (43 
CFR 3572.1).
    Associate Director means the Associate Director for Royalty 
Management of the MMS.
    Facility means a structure(s) used to store or process Federal or 
Indian mineral production prior to or at the point of royalty 
determination.
    Federal lease means a lease concerning minerals owned by the United 
States and includes a lease where an Alaska Native Corporation receives 
all or part of the royalties accruing from that lease, and the MMS has 
not waived administration of that lease.
    First purchaser means any entity receiving the lease production in a 
first transfer for value transaction.
    Gas means any fluid, either combustible or noncombustible, which is 
extracted from a reservoir and which has neither independent shape nor 
volume, but tends to expand indefinitely; a substance that exists in a 
gaseous or rarefied state under standard temperature and pressure 
conditions.
    Indian lease means a lease concerning lands or interest in lands of 
an Indian Tribe or an Indian allottee, his heirs or devisees, held in 
trust by the United States or which is subject to Federal restriction 
against alienation, including mineral resources and mineral estates 
reserved to an Indian Tribe or an Indian allottee, his heirs or devisees 
thereto in the conveyance of a surface

[[Page 148]]

or non-mineral estate, except that such term does not include any lands 
subject to the provisions of section 3 of the Act of June 28, 1906 (34 
Stat. 539).
    Lease means any contract, profit-share arrangement, joint venture, 
permit, or other agreement issued or approved by the United States under 
a mineral leasing law that authorizes exploration for, extraction of, or 
removal of oil, gas, or solid minerals--or the land area covered by that 
authorization, whichever is covered by the context.
    Lessee means any person to whom the United States, an Indian Tribe, 
or an Indian allottee, issues a lease, or any person who has been 
assigned an obligation to make royalty or other payments required by the 
lease.
    MMS/RMP means the Royalty Management Program of the Minerals 
Management Service.
    Measurement device means a mechanical or electrical device that is 
used to measure production of oil, gas, or solid minerals for sales, 
transfers, and/or royalty determination.
    Mine means an underground or surface excavation or series of 
excavations and the surface or underground support facilities that 
contribute directly or indirectly to mining, production, preparation, 
and handling of coal or other solid minerals.
    Mineral Leasing Law means any Federal law administered by the 
Secretary authorizing the disposition under lease of oil, gas, or solid 
minerals.
    Oil means any fluid hydrocarbon substance other than gas which is 
extracted in a fluid state from a reservoir and which exists in a fluid 
state under the existing temperature and pressure conditions of the 
reservoir. Oil includes liquefiable hydrocarbon substances such as drip 
gasoline or other natural condensates recovered in a liquid state from 
gas.
    Operator means any person, including a lessee who has control of, or 
who manages operations on, any oil and gas or solid minerals lease site 
on Federal (including the OCS) or Indian lands. ``Operator'' also means 
any entity engaged in the business of developing, drilling for, 
producing, transporting, purchasing, selling, or processing oil, gas or 
solid minerals and/or which has the responsibility of reporting 
production from a lease or a portion thereof.
    Outer Continental Shelf (OCS) has the same meaning as provided in 
section 2 of the Outer Continental Shelf Lands Act, 43 U.S.C. 1331.
    Person means any individual, firm, corporation, association, 
partnership, consortium or joint venture.
    Production Accounting and Auditing System (PAAS) means an integrated 
system of manual and automated processes for minerals production 
reporting, accounting, and auditing. Based upon production reports 
submitted by reporters, the PAAS will track oil, gas, and solid minerals 
produced from or allocated to Federal and Indian leases, including the 
OCS, from the source of production to the point of disposition with 
emphasis on the point of royalty determination, or point of sale, 
whichever is applicable.
    Raw make means natural gas liquids (NGL's) that are extracted from 
the wet gas stream at a gas plant (e.g., ethane through natural 
gasoline) which sometimes is transferred to a fractionation plant for 
further processing.
    Reporter means any reporting entity required to submit a PAAS report 
or form to the MMS.
    Secretary means the Secretary of the Interior or his/her designee.
    Solid minerals means those minerals including but not limited to 
coal, potash, sodium, phosphate, sulfur, lead, zinc, copper, silica 
sands, sand and gravel, and other minerals under mineral leasing laws 
originating from or allocated to Federal or Indian leases, excluding oil 
or gas, oil shale, and geothermal resources.

[51 FR 8175, Mar. 7, 1986, as amended at 58 FR 45254, Aug. 27, 1993]



Sec. 216.10  Information collection.

    The information collection requirements contained in this part have 
been approved by OMB under 44 U.S.C. 3501 et seq. The forms, filing 
date, and approved OMB clearance numbers are identified in 30 CFR 
210.10.

[57 FR 41867, Sept. 14, 1992]



Sec. 216.15  Reporting instructions.

    (a) Specific guidance on how to prepare and submit required 
information

[[Page 149]]

collection reports and forms to MMS is contained in a ``PAAS Reporter 
Handbook'' and a ``Paas Onshore Oil and Gas Reporter Handbook.'' The 
Reporter Handbooks are available from the Minerals Management Service, 
Royalty Management Program, P.O. Box 17110, Denver, Colorado 80217-0110.
    (b) Production reporters should refer to these handbooks for 
specific guidance with respect to production reporting requirements. If 
additional information is required, the reporter should contact the MMS 
at the above address. The telephone number is listed in the handbooks.

[53 FR 16412, May 9, 1988, as amended at 57 FR 41867, Sept. 14, 1992; 58 
FR 64903, Dec. 10, 1993]



Sec. 216.16  Where to report.

    (a) All reporting forms listed in this part that are mailed or sent 
by U.S. Postal Service express mail should be mailed to the Mineral 
Management Service, Royalty Management Program, P.O. Box 17110, Denver, 
Colorado 80217-0110.
    (b) Reports delivered to MMS by special couriers or overnight mail, 
except U.S. Postal Service express mail, shall be addressed as follows: 
Minerals Management Service, Royalty Management Program, Building 85, 
Denver Federal Center, Denver, Colorado 80225.
    (c) A report is considered received when it is delivered to MMS at 
the addresses specified in paragraphs (a) and (b) of this section. 
Reports received at the MMS addresses specified in paragraphs (a) and 
(b) of this section after 4 p.m. mountain time are considered received 
the following business day.

[56 FR 20127, May 2, 1991, as amended at 57 FR 41867, Sept. 14, 1992; 58 
FR 64903, Dec. 10, 1993]



Sec. 216.20  Applicability.

    The requirements of this part shall apply to all oil, gas, and solid 
mineral operators reporting information on Federal and Indian leases or 
federally-approved agreements, including leases or agreements on the 
OCS.

[58 FR 45254, Aug. 27, 1994]



Sec. 216.21  General obligations of the reporter.

    The reporter shall submit accurately, completely and timely, 
pursuant to the requirements of this part, all information forms and 
other information required by MMS. Specific guidance on the use of the 
required forms is contained in the Production Accounting and Auditing 
System Reporters Handbook. Copies of the handbook are available from the 
MMS.



Sec. 216.25  Confidentiality.

    (a) Information obtained by MMS pursuant to the rules of this part 
shall be open for public inspection and copying during regular office 
hours upon a written request, pursuant to rules at 43 CFR part 2, except 
that:
    (1) Notwithstanding any other provision of this part, information 
obtained from a reporter under this part relating to a minerals 
agreement approved pursuant to the Indian Mineral Development Act of 
1982, 25 U.S.C. 2101 et seq., the Tribal Leasing Act of 1938 (25 U.S.C. 
396a et seq.), or the Allotted Indian Mineral Development Act of 1909 
(25 U.S.C. 396), shall not be released without the written consent of 
the Indian Tribe(s) or individual Indian(s) who are parties to the 
mineral agreement.
    (2) Information obtained from a reporter pursuant to this part that 
constitutes a trade secret and/or commercial or financial information 
which is privileged or confidential, or other information that may be 
withheld under the Freedom of Information Act (5 U.S.C. 552(b)), such as 
geologic and geophysical data concerning wells, shall be available for 
public inspection in accordance with 43 CFR part 2. When such 
information is related to Indian lands, consent to release the 
information must also be obtained from the cognizant Tribe or allottee.
    (b) If any geologic and/or geophysical data is submitted under this 
part, these shall be made available to the public only in accordance 
with the provisions of 30 CFR 250.3, 250.4 and 252.7, if these relate to 
an offshore lease, and in accordance with 43 CFR 3162.8 if these relate 
to an onshore Federal or Indian lease.

[[Page 150]]



Sec. 216.30  Special forms and reports.

    When special forms or reports other than those referred to in the 
regulations in this part are necessary, instructions for the filing of 
such forms or reports will be provided by the Associate Director. Such 
requests will be made in conformity with the requirements of the 
Paperwork Reduction Act of 1980, and are expected to involve less than 
10 respondents annually.



Sec. 216.40  Assessments for incorrect or late reports and failure to report.

    (a) An assessment of an amount not to exceed $10 per day may be 
charged for each report not received by MMS by the designated due date.
    (b) An assessment of an amount not to exceed $10 may be charged for 
each incorrectly completed report.
    (c) For purposes of oil and gas reporting under the PAAS, a report 
is defined as each line of production information required on the 
Monthly Report of Operations (Form MMS-3160), Oil and Gas Operations 
Report (Form MMS-4054), Gas Analysis Report (Form MMS-4055), Gas Plant 
Operations Report (Form MMS-4056), and Production Allocation Schedule 
Report (Form MMS-4058).
    (d) For purposes of solid minerals reporting under PAAS, a report is 
defined as each line of production information required on the Solid 
Minerals Operation Report (Form MMS-4059) and Solid Minerals Facility 
Report (Form MMS-4060).
    (e) The MMS will not make assessments for reporting problems which 
are beyond the control of the reporter (e.g., reports received late 
because of bad weather). The reporter shall have the burden of proving 
that a reporting problem was unavoidable.
    (f) An assessment under this section shall not be shared with a 
State, Indian tribe, Indian allottee, or Alaska Native Corporation.
    (g) The amount of the assessment to be imposed pursuant to 
paragraphs (a) and (b) of this section shall be established periodically 
by MMS. The assessment amount for each violation will be based on MMS's 
experience with costs and improper reporting. The MMS will publish a 
Notice of the assessment amount to be applied in the Federal Register.

[51 FR 8175, Mar. 7, 1986, as amended at 52 FR 27546, July 22, 1987; 53 
FR 16412, May 9, 1988; 58 FR 64903, Dec. 10, 1993; 59 FR 38905, Aug. 1, 
1994]



                     Subpart B--Oil and Gas, General



Sec. 216.50  Monthly report of operations.

    (a) Each operator of each onshore Federal or Indian lease or 
agreement containing at least one well not permanently plugged and 
abandoned shall file a Monthly Report of Operations (Form MMS-3160) 
unless production data is authorized to be reported on Form MMS-4054. 
This requirement does not apply to reporting of operations of gas 
storage agreements, which must continue to be reported to the 
appropriate BLM office. A completed Form MMS-3160 shall be filed for 
each calendar month, beginning with the month in which drilling 
operations are initiated, on or before the 15th day of the second month 
following the month being reported until the lease or agreement is 
terminated, or the last well is approved as permanently plugged or 
abandoned by BLM and all inventory is disposed of, or until monthly 
omission of the report is authorized by MMS. The MMS may grant time 
extensions for filing Form MMS-3160 on a case-by-case basis upon written 
request to MMS.
    (b) Specific and detailed guidance on how to prepare and submit the 
required production data on the Form MMS-3160 are contained in the MMS 
PAAS Onshore Oil and Gas Reporter Handbook. See Sec. 216.15 of this 
part.
    (c)(1) Operators already reporting onshore lease production data to 
MMS in accordance with Sec. 216.53 of this part on the effective date of 
this rule may request to change to the provisions of this section. Any 
request to change to the requirements of this section must be made by 
advance written notice to MMS and have MMS approval.
    (2) An operator who reports production data to MMS for offshore 
leases in accordance with Sec. 216.53 of this part may request to report 
for its onshore leases in accordance with the requirements of that 
section. Any such request must be made by advance written

[[Page 151]]

notice to MMS and have MMS approval.
    (d)(1) Except where disclosure is required by law, information 
submitted on Form MMS-3160 that MMS classifies as confidential will be 
protected as such by both MMS and BLM for the period of 1 year. 
Operators must petition MMS for each lease or agreement to obtain a 
confidential classification and to extend the classification period 
beyond 1 year.
    (2) Except as provided by statute, information submitted on Form 
MMS-3160 in regard to Federal leases and Indian leases which are part of 
a unit containing non-Indian leases is not considered to be 
confidential.
    (3) Except where disclosure is required by law, all information 
submitted on Form MMS-3160 in regard to Indian leases, other than those 
included in paragraph (d)(2) of this section, will be considered to be 
confidential.
    (4) Except as provided in this subsection, all other information 
will be released.

[53 FR 16412, May 9, 1988, as amended at 58 FR 45254, Aug. 27, 1993; 58 
FR 64903, Dec. 10, 1993]



Sec. 216.51  Facility and Measurement Information Form.

    A Facility and Measurement Information Form (Form MMS-4051) must be 
filed for each facility or measurement device which handles production 
from any Federal or Indian lease, or federally-approved agreement, 
through the point of first sale or the point of royalty computation, 
whichever is later. The completed form must be filed by any operator 
(reporting production on a Form MMS-4054) of an onshore Facility 
Measurement Point (FMP) that handles production from any Federal or 
Indian lease or federally-approved agreement prior to, or at the point 
of royalty determination, or any operator who acquires an onshore FMP 
that is currently reporting to the PAAS. The report must be filed no 
later than 30 days after the establishment of a new facility or 
measurement device, or 30 days after a change is made to an existing 
facility or measurement device.

[58 FR 45254, Aug. 27, 1993]



Sec. 216.52  First Purchaser Report.

    The First Purchaser Report (Form MMS-4053) must be filed by first 
purchasers only upon the specific request of MMS.

[51 FR 8175, Mar. 7, 1986. Redesignated at 58 FR 64903, Dec. 10, 1993]



Sec. 216.53  Oil and Gas Operations Report.

    Every operator of an OCS lease or federally-approved offshore 
agreement and any operator of an onshore Federal or Indian lease or 
federally-approved agreement that has elected to report production on an 
Oil and Gas Operations Report (Form MMS-4054) instead of the Form MMS-
3160 (see Sec. 216.50(c)(2)) must file a Form MMS-4054 each month as 
long as there exists at least one well that is not permanently plugged 
and abandoned. A completed Form MMS-4054 must be filed for each calendar 
month, beginning with the month in which drilling operations are 
initiated, on or before the 15th day of the second month following the 
month being reported, until the lease or agreement is terminated, or the 
last well is permanently plugged or abandoned and all inventory is 
disposed of, or until omission of the report is authorized by MMS.

[58 FR 45255, Aug. 27, 1993. Redesignated at 58 FR 64903, Dec. 10, 1993]



Sec. 216.54  Gas Analysis Report.

    Any operator of an OCS lease or federally-approved agreement and, 
upon request by MMS, any operator of an onshore Federal or Indian lease 
or federally-approved agreement, from which gas is sold or is 
transferred for processing prior to the point of royalty computation, 
must file a Gas Analysis Report (Form MMS-4055) for each sales or 
transfer meter. The form is due at least twice a year; once in the first 
6 months of the calendar year, and once in the last 6 months of the 
calendar year, but may be submitted monthly, or as specified by the gas 
sales contract terms, and must be submitted on or before the 15th day of 
the second month following the end of the reporting period to which the 
information applies. All reports must be submitted by August 15th for 
any sales/transfers occurring

[[Page 152]]

in the first 6 months of the calendar year and February 15th of the 
following year for any sales/transfers occurring in the second 6 months 
of the calendar year.

[58 FR 45255, Aug. 27, 1993. Redesignated at 58 FR 64903, Dec. 10, 1993]



Sec. 216.55  Gas Plant Operations Report.

    The operator of each gas plant that processes gas that originates 
from an OCS lease or federally-approved agreement and, upon request by 
MMS, the operator of a gas plant that processes gas from an onshore 
Federal or Indian lease or federally-approved agreement, prior to the 
point of royalty computation, must file a Gas Plant Operations Report 
(Form MMS-4056) for each calendar month, beginning with the month in 
which processing of gas is initiated, on or before the 15th day of the 
second month following the month being reported. The report must show 
100 percent of the gas. If a plant no longer processes gas that 
originated from a Federal or Indian lease, or federally-approved 
agreement, prior to the point of royalty computation and has not 
processed such gas for 6 months or more, the operator of the gas plant 
is not required to file a Gas Plant Operations Report until the plant 
again produces such gas. The operator of the gas plant must notify MMS, 
in writing, when such gas has not been processed for 6 months or longer.

[58 FR 45255, Aug. 27, 1993. Redesignated at 58 FR 64903, Dec. 10, 1993]



Sec. 216.56  Production Allocation Schedule Report.

    (a) Any operator of an offshore Facility Measurement Point (FMP) 
handling production from a Federal lease or federally-approved agreement 
that is commingled (with approval) with production from any other source 
prior to measurement for royalty determination must file a Production 
Allocation Schedule Report (Form MMS-4058). This report is not required 
whenever all of the following conditions are met:
    (1) All leases involved are Federal leases;
    (2) All leases have the same fixed royalty rate;
    (3) All leases are operated by the same operator;
    (4) The facility measurement device is operated by the same person 
as the leases/agreements;
    (5) Production has not been previously measured for royalty 
determination; and
    (6) The production is not subsequently commingled and measured for 
royalty determination at an FMP for which Form MMS-4058 is required 
under this part.
    (b) A completed Form MMS-4058 must be filed for each calendar month, 
beginning with the month in which handling of production covered by this 
section is initiated, and must be filed on or before the 15th day of the 
second month following the month being reported.


[58 FR 45255, Aug. 27, 1993. Redesignated at 58 FR 64903, Dec. 10, 1993]



Sec. 216.57  Stripper royalty rate reduction notification.

    In accordance with its regulations at 43 CFR 3103.4-1, titled 
``Waiver, suspension, or reduction of rental, royalty, or minimum 
royalty,'' the Bureau of Land Management (BLM) may grant reduced royalty 
rates to operators of low producing oil leases to encourage continued 
production. Operators who have been granted a reduced royalty rate(s) by 
BLM must submit a Stripper Royalty Rate Reduction Notification (Form 
MMS-4377) to MMS for each 12-month qualifying period that a reduced 
royalty rate(s) is granted.

[58 FR 64903, Dec. 10, 1993]



               Subpart C--Oil and Gas, Onshore [Reserved]



          Subpart D--Oil, Gas, and Sulfur, Offshore [Reserved]



                   Subpart E--Solid Minerals, General

Sec. 216.200  [Reserved]



Sec. 216.201  Mine Information Report.

    The Mine Information Form (Form MMS-4050) must be filed for each 
mine that includes Federal or Indian leases

[[Page 153]]

in its approved mining plan. The completed form must be filed by the 
operator of the mine/lease(s). Form MMS-4050 must be filed at the 
request of the MMS initially during the conversion of the mine/lease(s) 
to the PAAS.



Sec. 216.202  Facility and Measurement Information Form.

    The Facility and Measurement Information Form (Form MMS-4051) must 
be filed for each facility or measurement device which handles solid 
mineral production from any Federal or Indian lease, or federally 
approved agreement, through the point of first sale or the point of 
royalty computation, whichever is applicable. The completed form must be 
filed by the operator of the facility or measurement device. Form MMS-
4051 must be filed initially at the request of the MMS during the 
conversion of facility and measurement device operators to the PAAS. 
Subsequent to conversion, Form MMS-4051 must be filed with MMS/RMP no 
later than 30 days after establishment of a new facility or measurement 
device, or a change to any existing facility or measurement device that 
handles production attributable to any Federal or Indian lease, or 
federally approved agreement, through the point of first sale or royalty 
computation, whichever is applicable.



Sec. 216.203  Solid Minerals Operations Report.

    The Solid Minerals Operation Report (Form MMS-4059) must be 
submitted by all Federal and Indian lease operators of producing mines 
that are part of an approved mine plan. Form MMS-4059 must be filed for 
the same period established for payment for royalties in the lease 
terms, unless a different reporting frequency is established by an MMS 
authorized official, and on or before the 15th day of the second month 
following the period being reported until all the leases within a mine 
are terminated or until omission of the report is authorized by the MMS.



Sec. 216.204  Solid Minerals Facility Report.

    The Solid Minerals Facility Report (Form MMS-4060) must be filed by 
operators of secondary processing facilities that handle production 
attributable to Federal or Indian leases where royalty is determined 
after processing. The report period is monthly, unless a longer period 
is specified in the lease document, or otherwise approved by the MMS. 
The Form MMS-4060 must be filed on or before the 15th day of the second 
month following the period being reported.



                       Subpart F--Coal [Reserved]



               Subpart G--Other Solid Minerals [Reserved]



               Subpart H--Geothermal Resources [Reserved]



                    Subpart I--Indian Land [Reserved]



PART 217--AUDITS AND INSPECTIONS--Table of Contents




                Subpart A--General Provisions [Reserved]

                     Subpart B--Oil and Gas, General

Sec.
217.50  Audits of records.
217.51  Lease account reconciliation.
217.52  Definitions.

               Subpart C--Oil and Gas, Onshore [Reserved]

           Subpart D--Oil, Gas and Sulfur, Offshore [Reserved]

                             Subpart E--Coal

217.200  Audits.

                     Subpart F--Other Solid Minerals

217.250  Audits.

                    Subpart G--Geothermal [Reserved]

                   Subpart H--Indian Lands [Reserved]

    Authority: 35 Stat. 312; 35 Stat. 781, as amended; secs. 32, 6, 26, 
41 Stat. 450, 753, 1248; secs. 1, 2, 3, 44 Stat. 301, as amended; secs. 
6, 3, 44 Stat. 659, 710; secs. 1, 2, 3, 44 Stat. 1057; 47 Stat. 1487; 49 
Stat. 1482, 1250, 1967, 2026; 52 Stat. 347; sec. 10, 53 Stat. 1196, as 
amended; 56 Stat. 273; sec. 10, 61 Stat. 915; sec. 3, 63 Stat. 683; 64 
Stat. 311; 25 U.S.C. 396, 396a-f, 30 U.S.C. 189, 271, 281, 293, 359. 
Interpret or apply secs. 5, 5, 44 Stat. 302, 1058, as amended; 58 Stat. 
483-485; 5 U.S.C. 301, 16 U.S.C. 508b, 30

[[Page 154]]

U.S.C. 189, 192c, 271, 281, 293, 359, 43 U.S.C. 387, unless otherwise 
noted.



                Subpart A--General Provisions [Reserved]



                     Subpart B--Oil and Gas, General

    Authority: The Federal Oil and Gas Royalty Management Act of 1982 
(30 U.S.C. 1701 et seq.).

    Source: 49 FR 37345, Sept. 21, 1984, unless otherwise noted.



Sec. 217.50  Audits of records.

    The Secretary, or his/her authorized representative, shall initiate 
and conduct audits relating to the scope, nature and extent of 
compliance by lessees, operators, revenue payors, and other persons with 
rental, royalty, net profit share and other payment requirements on a 
Federal or Indian oil and gas lease. Audits also will relate to 
compliance with applicable regulations and orders. All audits will be 
conducted in accordance with the notice and other requirements of 30 
U.S.C. 1717.



Sec. 217.51  Lease account reconciliation.

    Specific lease account reconciliations shall be performed with 
priority being given to reconciling those lease accounts specifically 
identified by a State or Indian tribe as having significant potential 
for underpayment.



Sec. 217.52  Definitions.

    Terms used in this subpart shall have the same meaning as in 30 
U.S.C. 1702.



               Subpart C--Oil and Gas, Onshore [Reserved]



           Subpart D--Oil, Gas and Sulfur, Offshore [Reserved]



                             Subpart E--Coal



Sec. 217.200  Audits.

    An audit of the accounts and books of operators/lessees for the 
purpose of determining compliance with Federal lease terms relating to 
Federal royalties may be required annually or at other times as directed 
by the Associate Director for Royalty Management. The audit shall be 
performed by a qualified independent certified public accountant or by 
an independent public accountant licensed by a State, territory, or 
insular possession of the United States or the District of Columbia, and 
at the expense of the operator/lessee. The operator/lessee shall 
furnish, free of charge, duplicate copies of audit reports that express 
opinions on such compliance to the Associate Director for Royalty 
Management within 30 days after the completion of each audit. Where such 
audits are required, the Associate Director for Royalty Management will 
specify the purpose and scope of the audit and the information which is 
to be verified or obtained.

[47 FR 33195, July 30, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983]



                     Subpart F--Other Solid Minerals



Sec. 217.250   Audits.

    An audit of the lessee's accounts and books may be made annually or 
at such other times as may be directed by the mining supervisor, by 
certified public accountants, and at the expense of the lessee. The 
lessee shall furnish free of cost duplicate copies of such annual or 
other audits to the mining supervisor, within 30 days after the 
completion of each auditing.

[37 FR 11041, June 1, 1972. Redesignated at 48 FR 35641, Aug. 5, 1983]



                    Subpart G--Geothermal [Reserved]



                   Subpart H--Indian Lands [Reserved]



PART 218--COLLECTION OF ROYALTIES, RENTALS, BONUSES AND OTHER MONIES DUE THE FEDERAL GOVERNMENT--Table of Contents




                      Subpart A--General Provisions

Sec.
218.10  Information collection.
218.40  Assessments for incorrect or late reports and failure to report.
218.41  Assessments for failure to submit payment of same amount as Form 
          MMS-2014 or bill document or to provide adequate information.

[[Page 155]]

218.42  Cross-lease netting in calculation of late-payment interest.

                     Subpart B--Oil and Gas, General

218.50  Timing of payment.
218.51  How to make payments.
218.52  Designated payor.
218.53  Recoupment of overpayments on Indian mineral leases.
218.54  Late payments.
218.55  Interest payments to Indians.
218.56  Definitions.
218.57  Providing information and claiming rewards.

                     Subpart C--Oil and Gas, Onshore

218.100  Royalty and rental payments.
218.101  Royalty and rental remittance (naval petroleum reserves).
218.102  Late payment or underpayment charges.
218.103  Payments to States.
218.104  Exemption of States from certain interest and penalties.
218.105  Definitions.

                Subpart D--Oil, Gas and Sulfur, Offshore

218.150  Royalties, net profit shares, and rental payments.
218.151  Rentals.
218.152  Fishermen's Contingency Fund.
218.153  [Reserved]
218.154  Effect of suspensions on royalty and rental.
218.155  Method of payment.
218.156  Definitions.

                   Subpart E--Solid Minerals--General

218.200  Payment of royalties, rentals, and deferred bonuses.
218.201  Method of payment.
218.202  Late payment or underpayment charges.
218.203  Recoupment of overpayments on Indian mineral leases.

                     Subpart F--Geothermal Resources

218.300  Payment of royalties, rentals, and deferred bonuses.
218.301  Method of payment.
218.302  Late payment or underpayment charges.

                   Subpart G--Indian Lands [Reserved]

    Authority: 25 U.S.C. 396 et seq., 396a et seq., 2101 et seq.; 30 
U.S.C. 181 et seq. 351 et seq., 1001 et seq., 1701 et seq.; 31 U.S.C.A. 
3335; 43 U.S.C. 1301 et seq. 1331 et seq., 1801 et seq.



                      Subpart A--General Provisions



Sec. 218.10  Information collection.

    The information collection requirements contained in this part have 
been approved by OMB under 44 U.S.C. 3501 et seq. The forms, filing 
date, and approved OMB clearance numbers are identified in 30 CFR 
210.10.

[57 FR 41867, Sept. 14, 1992]



Sec. 218.40  Assessments for incorrect or late reports and failure to report.

    (a) An assessment of an amount not to exceed $10 per day may be 
charged for each report not received by MMS by the designated due date.
    (b) An assessment of an amount not to exceed $10 may be charged for 
each incorrectly completed report.
    (c) For purposes of reports required for the Auditing and Financial 
System (AFS), a report is defined as each line item on a Form MMS-2014. 
The line item consists of the various information, such as Product Code 
or Selling Arrangement Code, relating to each Accounting Identification 
Number (AID).
    (d) An assessment under this section shall not be shared with a 
State, Indian tribe, or Indian allottee.
    (e) The amount of the assessment to be imposed pursuant to 
paragraphs (a) and (b) of this section shall be established periodically 
by MMS. The assessment amount for each violation will be based on MMS's 
experience with costs and improper reporting. The MMS will publish a 
Notice of the assessment amount to be applied in the Federal Register.

[49 FR 37346, Sept. 21, 1984. Redesignated and amended at 51 FR 15767, 
Apr. 28, 1986; 52 FR 27546, July 22, 1987; 52 FR 37452, Oct. 7, 1987; 57 
FR 52720, Nov. 5, 1992; 59 FR 38906, Aug. 1, 1994]



Sec. 218.41  Assessments for failure to submit payment of same amount as Form MMS-2014 or bill document or to provide adequate information.

    (a) An assessment of an amount not to exceed $250 may be charged 
when the amount of a payment submitted by a payor is not equivalent in 
amount to the total of individual line items on the associated Form MMS 
2014 or bill

[[Page 156]]

document, unless the difference in amount has been authorized by MMS.
    (b) An assessment of an amount not to exceed $250 may be charged for 
each payment submitted by a payor that cannot be automatically applied 
by AFS to the associated Form MMS-2014 or bill document because of 
inadequate or erroneous information submitted by the payor. For purposes 
of this section, inadequate or erroneous information is defined as:
    (1) Absent or incorrect payor assigned document number, required to 
be identified by the payor in Block 3a on a Form MMS-2014, or the reuse 
of the same payor assigned document (``3a'') number in a subsequent 
reporting period.
    (2) Absent or incorrect bill document invoice number (to include the 
four character alpha prefix and the eight digit number) or the payor-
assigned 3a number required to be identified by the payor on the 
associated payment document, or the reuse of the same payor assigned 3a 
number in a subsequent reporting period.
    (3) Absent or incorrect name of the administering Bureau of Indian 
Affairs Agency/Area office and the word ``allotted'' or the tribe name 
on payment documents remitted to MMS for an Indian tribe or allottee. If 
the payment is made by EFT, the payor must identify the tribe/allottee 
on the EFT message by a pre-established five digit code.
    (4) Absent or incorrect MMS assigned payor code on a payment 
document.
    (c) For purposes of this section, the term ``Form MMS-2014'' 
includes submission of reports of royalty information by magnetic media. 
Magnetic media submissions include submissions by magnetic tape, 
magnetic cartridge, or floppy diskette.
    (d) For purposes of this section, a bill document is defined as any 
Bill of Collection (Form DI-1040b) that has been issued by MMS for 
assessments, late-payment interest charges, or other amounts owed.
    (e) For purposes of this section, a payment document is defined as 
one of the payment methods identified in Sec. 218.51(a)(3).
    (f) The amount of the assessment to be imposed pursuant to 
paragraphs (a) and (b) of this section shall be established periodically 
by MMS. The assessment amount will be based on MMS' experience with 
costs and improper reporting and/or payment as specified in this 
section. The MMS will publish a Notice in the Federal Register of the 
assessment amount to be applied with the effective date.

[58 FR 45438, Aug. 30, 1993]



Sec. 218.42  Cross-lease netting in calculation of late-payment interest.

    (a) Interest due from a payor on any underpayment for any Federal 
mineral lease or leases (onshore or offshore) and on any Indian tribal 
mineral lease or leases for any production month shall not be reduced by 
offsetting against that underpayment any overpayment made by the payor 
on any other lease or leases, except as provided in paragraph (b) of 
this section. Interest due from a payor or any underpayment on any 
Indian allotted lease shall not be reduced by offsetting against any 
overpayment on any other Indian allotted lease under any circumstances.
    (b) Royalties attributed to production from a lease or leases which 
should have been attributed to production from a different lease or 
leases may be offset to determine whether and to what extent an 
underpayment exists on which interest is due if the following conditions 
are met:
    (1) The error results from attributing and reporting an equal volume 
of production, produced from a lease or leases during a particular 
production month, to a different lease or leases from which it was not 
produced for the same or another production month;
    (2) The payor is the same for the lease or leases to which 
production was attributed and the lease or leases to which it should 
have been attributed;
    (3) The payor submits production reports, pipeline allocation 
reports, or other similar documentary evidence pertaining to the 
specific production involved which verifies the correct production 
information;
    (4) The lessor is the same for the leases involved (in the case of 
Indian tribal leases, the same tribe is the lessor); and
    (5) The ultimate recipients of any royalty or other lease revenues 
under

[[Page 157]]

any applicable permanent indefinite appropriations are the same for, and 
receive the same percentage of revenue from, the leases.
    (c) If MMS assesses late-payment interest and the payor asserts that 
some or all of the interest assessed is not owed pursuant to the 
exception set forth in paragraph (b) of this section, the burden is on 
the payor to demonstrate that the exception applies in the specific 
circumstances of the case.
    (d) The exception set forth in paragraph (b) of this section shall 
not operate to relieve any payor of liability imposed by statute or 
regulation for erroneous reporting.

[57 FR 62206, Dec. 30, 1992]



                     Subpart B--Oil and Gas, General

    Source: 49 FR 37346, Sept. 21, 1984, unless otherwise noted.



Sec. 218.50  Timing of payment.

    (a) Royalty payments are due at the end of the month following the 
month during which the oil and gas is produced and sold except when the 
last day of the month falls on a weekend or holiday. In such cases, 
payments are due on the first business day of the succeeding month. 
Rental payments are due as specified by the lease terms.
    (b) Payments made on a Bill for Collection (Form DI-1040b) are due 
as specified by the Bill. Bills for Collection will be issued and 
payable as final collection actions.
    (c) All payments to MMS are due as specified and are not deferred or 
suspended by reason of an appeal having been filed unless such deferral 
or suspension is approved in writing by an authorized MMS official.



Sec. 218.51  How to make payments.

    (a) Definitions.
    ACH--Automated Clearing House. A type of EFT using the ACH network.
    Courtesy Notice--An MMS-issued notice of rental or bonus due.
    Deferred Bonus Payment--Lease bonus paid in equal annual 
installments over a specified number of years.
    EFT--Electronic Funds Transfer. Any paperless transfer of funds a 
bank initiates through an electronic terminal. For MMS purposes, EFT is 
limited to FEDWIRE and ACH transfers.
    FEDWIRE--A type of EFT using the Federal Reserve Wire network.
    Invoice Document Identification--The MMS-assigned invoice document 
identification (four alpha and eight numeric characters).
    Payment--Any monies for royalty, bonus, rental, late payment charge, 
assessment, penalty, or other money sent to MMS.
    Person--Any individual, firm, corporation, association, partnership, 
consortium, or joint venture (when established as a separate entity). 
The term does not include Federal agencies.
    Report--Form MMS-2014, Report of Sales and Royalty Remittance.
    RIK--Royalty in kind.
    (b) General Instructions. You must make all payments to MMS 
electronically to the extent it is cost effective and practical. If you 
pay money to MMS or to an Indian tribe or allottee, you must follow 
these procedures:
    (1) If MMS instructs you to use EFT, you must use EFT for all 
payments to MMS and/or a tribe.
    (2) Contact MMS before using EFT. MMS will provide you with EFT 
payment instructions.
    (3) Separate any payments on a Federal lease from any payments on an 
Indian lease.
    (4) If you are not required to use EFT, use one of the following 
types of payment documents. MMS prefers that you use these payment 
documents in the order presented:
    (i) Commercial check drawn on a solvent bank;
    (ii) Certified check;
    (iii) Cashier's check;
    (iv) Money order;
    (v) Bank draft drawn on a solvent bank; or
    (vi) Federal Reserve check.
    (5) You must include your payor code on all payments.
    (6) You must pay in U.S. dollars.
    (c) How to complete a non-EFT payment. (1) Make any payment on a 
Federal lease payable to: ``Department of the Interior-Minerals 
Management Service'' or ``DOI-MMS.''
    (2) For an Indian allottee payment, send a separate payment for each 
Bureau of Indian Affairs (BIA) agency or

[[Page 158]]

area office represented by the leases on your report or invoice 
document. You must include the name of the applicable BIA agency or area 
office on your payment. Make your payment document payable to: 
``Department of the Interior-Minerals Management Service for BIA [Name] 
Agency (allotted)'' or ``DOI-MMS for BIA [Name] Agency (allotted).''
    (3) For an Indian tribal payment other than a lockbox payment, send 
a separate payment for each tribe represented by the leases on your 
report or invoice document. You must include the name of the Indian 
tribe on your payment. Make it payable to: ``Department of the Interior-
Minerals Management Service for BIA [Name of Tribe]'' or ``DOI-MMS for 
BIA [Name of Tribe].''
    (4) For an Indian tribal lockbox payment, follow the instructions 
MMS provides you on how to report and make the lockbox payment. These 
instructions are specific to each tribe's lockbox written agreement with 
the bank authorized to receive payments on the tribe's mineral leases. 
You will receive these instructions from MMS when you are required to 
use a tribal lockbox for reports and payments.
    (d) Where to send a non-EFT payment when you use the U.S. Postal 
Service. (1) For a payment to an Indian tribal lockbox, send your 
payment to the appropriate tribal lockbox address.
    (2) For a Federal nonproducing lease rental or deferred bonus 
payment, send it to:

    Minerals Management Service, Royalty Management Program, P.O. Box 
5640, Denver, CO 80217-5640.

    (3) For all other Federal and Indian lease payments other than those 
going to an Indian tribal lockbox, send them to:

    Minerals Management Service, Royalty Management Program, P.O. Box 
5810, Denver, CO 80217-5810.

    (e) Where to send a non-EFT payment when you use a courier or 
overnight delivery service. You should send this type of payment to:

    Minerals Management Service, Royalty Management Program, Building 
85, Denver Federal Center, Room A-212, Denver, CO 80225-0165.
    (f) How to prepare and what to include on your payment document. (1) 
For Form MMS-2014 payments, you must include both your payor code (block 
2) and your payor-assigned document number (block 3a).
    (2) For invoice payments, including RIK invoice payments, you must 
include both your payor code and invoice document identification (four-
letter prefix and eight-digit number).
    (3) For bonus payments:
    (i) For one-fifth bonus payments for offshore oil, gas, and sulphur 
leases, follow the instructions in the Notice of Lease Offering.
    (ii) For payment of the four-fifths bonus for an offshore lease, use 
EFT and follow the instructions in Sec. 218.155(c).
    (iii) For the successful bidder's bonus in the competitive sale of a 
coal, geothermal, or offshore mineral (other than oil, gas or sulfur) 
lease, follow the instructions and terms of the Notice of Competitive 
Lease Sale.
    (iv) For installment payments of deferred bonuses, you must use EFT.
    (4) If you are paying a lease rental you must:
    (i) See 30 CFR 218.155(c) for instructions on how to pay first-year 
rentals of an offshore oil, gas, or sulfur lease;
    (ii) See the Notice of Lease Offering for instructions on how to pay 
first-year rentals other than those covered in paragraph (f)(4)(i) of 
this section.
    (iii) Include the MMS Courtesy Notice, when provided, or write your 
payor code and government-assigned lease number on the payment document 
when paying a rental that is not reported on Form MMS-2014 and not paid 
by EFT.
    (g) When is a payment to MMS due? (1) All payments are due to MMS at 
the time law, regulation, or lease terms require unless MMS approves a 
change according to 30 CFR 243.2, ``Suspensions of orders or decisions 
pending appeal.'' If you file an appeal, and the requirement to submit 
payment is suspended, the original payment due date for purposes such as 
calculating late payment interest is not changed.
    (2) If you use the U.S. Postal Service, courier, or overnight mail 
to send your

[[Page 159]]

payment, it is due at the MMS addresses in paragraphs (d) and (e) of 
this section before 4 p.m. Mountain Time on the due date, regardless of 
when you sent it.
    (3) If you use EFT to send your payment, it is due in the MMS 
account by the payment due date. You are responsible for your actions or 
your bank's actions that cause a late or incorrect payment. You will not 
be held responsible for mechanical or system failures of EFT payments.
    (h) What happens if payments are late or overdue?
     (1) If MMS receives your payment late, MMS will impose a late-
payment interest charge under 30 CFR 218.54.
    (2) If you do not pay an amount you owe, MMS may assess civil 
penalties under 30 CFR 241.20 and 241.51 or other applicable 
regulations.

[62 FR 19498, Apr. 22, 1997]



Sec. 218.52  Designated payor.

    (a) When the lessee or revenue payor assigns any paying 
responsibility to any other entity, MMS must be notified within 30 days 
of the assignment.
    (b) MMS may, by order, designate a lessee or revenue payor on a 
lease as the single payor for all revenues due and owing from that 
lease.



Sec. 218.53  Recoupment of overpayments on Indian mineral leases.

    (a) Whenever an overpayment is made under an Indian oil and gas 
lease, a payor may recoup the overpayment through a recoupment on Form 
MMS-2014 against the current month's royalties or other revenues owed on 
the same lease. However, for any month a payor may not recoup more than 
50 percent of the royalties or other revenues owed in that month under 
an individual allotted lease or more than 100 percent of the royalties 
or other revenues owed in that month under a tribal lease.
    (b) With written permission authorized by tribal statute or 
resolution, a payor may recoup an overpayment against royalties or other 
revenues owed in that month under other leases for which that tribe is 
the lessor. A copy of the tribe's written permission must be furnished 
to MMS pursuant to instructions for reporting recoupments in the MMS 
``Oil and Gas Payor Handbook.'' See 30 CFR 210.53. Recouping 
overpayments on one allotted lease from royalties paid to another 
allotted lease is specifically prohibited.
    (c) Overpayments subject to recoupment under this section include 
all payments made in excess of the required payment for royalty, rental, 
bonus, or other amounts owed as specified by statute, regulation, order, 
or terms of an Indian mineral lease.
    (d) The MMS Director or his/her designee may order any payor to not 
recoup any amount for such reasonable period of time as may be necessary 
for MMS to review the nature and amount of any claimed overpayment.

[60 FR 3087, Jan. 13, 1995]



Sec. 218.54  Late payments.

    (a) An interest charge shall be assessed on unpaid and underpaid 
amounts from the date the amounts are due.
    (b) The interest charge on late payments shall be at the 
underpayment rate established by the Internal Revenue Code, 26 U.S.C. 
6621(a)(2) (Supp. 1987).
    (c) Interest will be charged only on the amount of the payment not 
received. Interest will be charged only for the number of days the 
payment is late.
    (d) A portion of the interest collected will be paid to a State 
where the State shares in mineral revenues from Federal leases.
    (e) An overpayment on a lease or leases may be offset against an 
underpayment on a different lease or leases to determine a net 
underpayment on which interest is due pursuant to conditions specified 
in Sec. 218.42.

[49 FR 37346, Sept. 21, 1984, as amended at 55 FR 37230, Sept. 10, 1990; 
57 FR 62206, Dec. 30, 1992]



Sec. 218.55  Interest payments to Indians.

    (a) All interest collected from unpaid or underpayments on Indian 
tribal or allotted leases will be paid to the tribe or allottee.
    (b) Any disbursement of Indian mineral revenues not made by the due 
date as required in Sec. 219.103 of this chapter shall accrue interest.

[[Page 160]]

    (c) Interest shall be computed at the underpayment rate established 
by the Internal Revenue Code, 26 U.S.C. 6621(a)(2) (Supp. 1987).
    (d) The interest shall be payable only for the number of days the 
disbursement is late.

[49 FR 37346, Sept. 21, 1984, as amended at 55 FR 37230, Sept. 10, 1990]



Sec. 218.56  Definitions.

    Terms used in this subpart shall have the same meaning as in 30 
U.S.C. 1702.

[49 FR 37346, Sept. 21, 1984. Redesignated at 51 FR 15767, Apr. 28, 
1986]



Sec. 218.57  Providing information and claiming rewards.

    (a) General. (1) If a person has any information that could lead to 
the recovery of royalty or other payments owed to the United States with 
respect to any oil and gas lease on Federal lands or the Outer 
Continental Shelf, such information may be provided to the Minerals 
Management Service (MMS) in accordance with this paragraph. The MMS is 
authorized, under the Federal Oil and Gas Royalty Management Act of 1982 
(FOGRMA), 30 U.S.C. 1723, to pay a reward for information with respect 
to Federal oil and gas leases. Funds must be appropriated before payment 
of any reward. Criteria and procedures covering claims for and payment 
of rewards are provided in paragraphs (b), (c), and (d) of this section.
    (2) If a person has any information he or she believes would be 
valuable to MMS, that person (``informant'') should submit the 
information in writing, in the form of a letter, mailed or delivered in 
person to the Director, Minerals Management Service, Department of the 
Interior, 18th and C Street, NW., Washington, DC 20240, or to the 
Director's designated representative. Although written communications 
are preferred, oral information will be accepted.
    (3) The informant should provide all data he or she has with respect 
to royalty or other payments owed. The information provided should 
include: identification of the alleged debtor; the source of the 
informant's knowledge of royalties or other payments owed; the date, if 
known, of the indebtedness; and any other information that could be used 
to establish indebtedness. All information received by MMS from persons 
providing information will be considered ``highly confidential'' and 
will not be disclosed to any individual except on a ``need to know'' 
basis in the performance of official duties.
    (b) Claim for reward. (1) Any informant who provides information 
that could lead to the recovery of royalty or other payments may file a 
claim for reward unless the person is an officer or employee of the 
United States, an officer or employee of a State or Indian tribe acting 
pursuant to a cooperative agreement or delegation under the FOGRMA, or 
any person acting pursuant to a contract authorized by the FOGRMA.
    (2) A claim for reward is not acceptable if filed on behalf of a 
claimant by his or her agent under power of attorney. However, an agent 
may provide MMS with information for an unidentified informant, to be 
evaluated and used by MMS as it deems appropriate. The informant's 
identity ultimately must be disclosed if the informant intends to file a 
claim for reward so that MMS can report the reward as taxable income to 
the Internal Revenue Service. An executor, administrator, or other legal 
representative of a deceased informant may file a claim on behalf of 
such deceased informant if, prior to his or her death, the informant was 
eligible to file a claim under this section. The representative must 
attach to the claim evidence of authority to file it.
    (3) To file a claim for reward the informant must:
    (i) Notify the Director, MMS, or the person to whom the information 
was reported, that he/she is claiming a reward.
    (ii) Request an ``Application for Reward for Original Information'' 
(Form MMS-4280). This form provides for information to enable MMS to 
determine and pay rewards, to control reward applications, and to report 
a claimant's reward as taxable income to the Internal Revenue Service.
    (iii) File a claim for reward by completing Form MMS-4280, sign it 
with his or her true name, and mail or deliver it in person to the 
Director or to

[[Page 161]]

the Director's designated representative. If the informant provided the 
information in person, the claim should include the name and title of 
the person to whom the information was reported and the date that it was 
reported.
    (4) If the informant used an identity other than his or true name 
when the information was originally reported, the person should attach 
proof to the claim that he or she is the person who gave the 
information. The MMS does not disclose the identity of its informants to 
unauthorized persons.
    (c) Basis for rejection of claims. No reward will be paid to a 
claimant:
    (1) Where the information originally furnished was deemed unworthy 
of initiating an investigation, but at some later date the records of 
the lessee are examined without reference to the information furnished. 
The claim will be rejected on the basis that the information did not 
cause the investigation nor did it, in itself, result in any recovery.
    (2) For information that would have been discovered during the 
normal course of an audit or investigation.
    (3) Unless the informant's true identity is disclosed.
    (4) Until after all of the royalties, penalties, or other payments 
discovered to be owed as a result of information provided are collected 
and no longer subject to dispute.
    (5) Unless funds are appropriated for the payment of rewards.
    (d) Basis for allowance of claims. (1) The value of the information 
furnished in relation to the facts developed by the investigation will 
be taken into account in determining whether a reward shall be paid and, 
if so, the amount thereof. Information must be voluntarily given and 
upon the informant's own initiative to warrant the allowance of a 
reward. Information secured by representatives of MMS from witnesses and 
others in the course of their investigative activities does not 
constitute a basis for reward.
    (2) In determining whether a reward will be allowed and, if so, the 
amount thereof, consideration will be given to any corresponding 
adjustment(s) which will result in potential savings to the lessee for 
other leases owned by the lessee or an affiliate of the lessee. An 
example of such an adjustment is a reduction in royalty payment on a 
different lease as the result of a revised allocation under a 
unitization or communitization agreement or from an offshore pipeline 
system. Rewards otherwise allowable will be reduced or rejected by 
reason of such offsetting adjustments.
    (3) If several claims filed by one informant are considered in one 
recommendation, the reward, if any, may be allowed on one claim and the 
others may be closed by reference.
    (4) Where an informant has provided information and filed a claim 
for reward with respect to royalty reports of one lessee for several 
leases, no reward will be granted with respect to an individual lease 
which has been examined until examination of all leases involved has 
been completed. Because the possibility exists that adjustments made to 
the reports for the open leases may result in offsetting adjustments, no 
reward will be allowed until the overall results of the information are 
evaluated.
    (e) Amount and payment of reward. (1) The Director, MMS will 
determine whether a reward will be paid and, if so, the amount thereof. 
In making this decision, the information provided will be evaluated in 
relation to the facts developed by the resulting investigation. Claims 
for reward will be paid in proportion to the value of information 
furnished voluntarily and on the informant's own initiative with respect 
to recovered royalties or other payments. The amount of reward will be 
determined as follows:
    (i) For specific and responsible information that caused the 
investigation and resulted in recovery, the reward will be 10 percent of 
the first $75,000 recovered, 5 percent of the next $25,000, and 1 
percent of any additional recovery. The total reward cannot exceed 
$100,000.
    (ii) For information that caused the examination and was of value in 
determining royalty or other payments due, although not specific, and 
for information that was a direct factor in recovering royalty or other 
payments, the reward will be 5 percent of the first $75,000 recovered, 
2\1/2\ percent of the

[[Page 162]]

next $25,000, and \1/2\ percent of any additional recovery. The total 
reward cannot exceed $100,000.
    (iii) For information that caused the investigation but was of no 
value in determining royalty or other payments due, the reward will be 1 
percent of the first $75,000 recovered and \1/2\ percent of any 
additional recovery. The total reward cannot exceed $100,000.
    (2) Rewards will be paid only if moneys are appropriated for that 
purpose. Subject to appropriations, payments will be made as soon as 
possible after collection of the amounts owed by the lessee, and after 
those amounts no longer are subject to dispute by the payor. The reward 
payment to an informant will be net of Federal and State income tax in 
accordance with withholding guidelines of the Internal Revenue Service 
and the applicable State(s).
    (3) A decision by the Director, MMS, either denying a reward or 
establishing the amount of any reward is a final departmental action and 
may not be appealed to the Interior Board of Land Appeals in accordance 
with the provisions of 30 CFR part 290.

(Approved by the Office of Management and Budget under control number 
1010-0076)

[52 FR 24451, July 1, 1987]



                     Subpart C--Oil and Gas, Onshore



Sec. 218.100  Royalty and rental payments.

    (a) Payment of royalties and rentals. As specified under the 
provisions of the lease, the lessee shall submit all rental payments 
when due and shall pay in value or deliver in production all royalties 
in the amounts of value or production determined by MMS to be due.
    (b) If the lessor elects to take royalty in oil or gas, unless 
otherwise agreed upon, such royalty shall be delivered on the leasehold, 
by the lessee to the order of and without cost to the lessor, as 
instructed by the Associate Director.
    (c) Method of payment. The payor shall tender all payments in 
accordance with 30 CFR 218.51.

[47 FR 47773, Oct. 27, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983, 
and amended at 52 FR 23815, June 25, 1987]



Sec. 218.101  Royalty and rental remittance (naval petroleum reserves).

    Remittance covering payments of royalty or rental on naval petroleum 
reserves must be accomplished by necessary identification information 
and sent direct to the Director, Naval Petroleum Reserves in California.

[47 FR 47773, Oct. 27, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983]



Sec. 218.102  Late payment or underpayment charges.

    (a) The failure to make timely or proper payments of any monies due 
pursuant to leases, permits, and contracts subject to these regulations 
will result in the collection by the MMS of the full amount past due 
plus a late payment charge. Exceptions to this late payment charge may 
be granted when estimated payments on minerals production have already 
been made timely and otherwise in accordance with instructions provided 
by MMS to the payor. However, late payment charges assessed with respect 
to any Indian lease, permit, or contract shall be collected and paid to 
the Indian or tribe to which the amount overdue is owed.
    (b) Late payment charges will be assessed on any late payment or 
underpayment from the date that the payment was due until the date that 
the payment was received at the MMS addresses specified in 
Sec. 218.51(f)(1) and (f)(2). Payments received at the specified MMS 
addresses after 4 p.m. mountain time are considered received the 
following business day.
    (c) Late payment charges apply to all underpayments and payments 
received after the date due. The charges include production and minimum 
royalties; assessments for liquidated damages; administrative fees and 
payments by purchasers of royalty taken-in-kind; or any other payments, 
fees, or assessments that a lessee/operator/permittee/payor/royalty 
taken-in-kind purchaser is required to pay by a specified date. The 
failure to pay past due amounts, including late-payment charges, will 
result in the initiation of other enforcement proceedings.
    (d) An overpayment on a lease or leases may be offset against an 
underpayment on a different lease or leases

[[Page 163]]

to determine a net underpayment on which interest is due pursuant to 
conditions specified in Sec. 218.42.

[47 FR 47773, Oct. 27, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983, 
and amended at 49 FR 37347, Sept. 21, 1984; 57 FR 41868, Sept. 14, 1992; 
57 FR 62206, Dec. 30, 1992]



Sec. 218.103  Payments to States.

    (a) Any amount that is payable by MMS to a State but is not paid on 
the due date, as specified in Sec. 219.100 of this chapter, or that is 
held in a suspense account pending resolution of a dispute as specified 
in Sec. 219.101 of this chapter, shall accrue interest payable to the 
State.
    (b) Interest shall be computed at the underpayment rate established 
by the Internal Revenue Code, 26 U.S.C. 6621(a)(2) (Supp. 1987).
    (c) Interest shall be computed only for the number of days the 
disbursement is late. In the case of suspended amounts subject to 
interest, it shall be computed beginning with the calendar day following 
the day that the monies normally would have been paid to the State had 
they not been in suspense.

[49 FR 37347, Sept. 21, 1984, as amended at 55 FR 37230, Sept. 10, 1990]



Sec. 218.104  Exemption of States from certain interest and penalties.

    (a) States are exempt from being assessed for any interest or 
penalties found to be due against the Department of the Interior for 
failure to comply with the Emergency Petroleum Allocation Act of 1973, 
as amended, or any regulation issued by the Secretary of Energy 
thereunder concerning the certification or processing of crude oil taken 
in-kind as royalty by the Secretary.
    (b) Any State shall be assessed for its share of any overcharge 
resulting from a determination that DOI failed to comply with the 
Emergency Petroleum Allocation Act of 1973, as amended. Each State's 
share shall be assessed against monies owed to the State. Such 
assessment shall be first against monies owed to such State as a result 
of royalty audits prior to January 12, 1983, the enactment date of the 
Federal Oil and Gas Royalty Management Act of 1982, then against other 
monies owed. The State shall be liable for any balance.
    (c) A State's liability for repayment of an overcharge under this 
section shall exist for any amounts resulting from a judgment in a civil 
suit or as the result of settlement of a claim through a negotiated 
agreement. State liability would be offset against future mineral 
revenue distributions to the State.

[49 FR 37347, Sept. 21, 1984]



Sec. 218.105  Definitions.

    Terms used in this subpart have the same meaning as in 30 U.S.C. 
1702.

[49 FR 37347, Sept. 21, 1984]



                Subpart D--Oil, Gas and Sulfur, Offshore



Sec. 218.150  Royalties, net profit shares, and rental payments.

    (a) As specified under the provisions of the lease, the lessee shall 
submit all rental payments when due and shall pay in value or deliver in 
production all royalties and net profit shares in the amounts of value 
or production determined by MMS to be due.
    (b) The failure to make timely or proper payments of any monies due 
pursuant to leases, permits, and contracts subject to these regulations 
will result in the collection of the amount past due plus a late payment 
charge. Exceptions to this late payment charge may be granted when 
estimated payments on minerals production have already been made timely 
and otherwise in accordance with instructions provided by MMS to the 
payor.
    (c) Late payment charges will be assessed on any late payment or 
underpayment from the date that the payment was due until the date that 
the payment was received at the MMS addresses specified in 
Sec. 218.51(f)(1) and (f)(2). Payments received at the specified MMS 
addresses after 4 p.m. mountain time are considered received the 
following business day.
    (d) Late payment charges apply to all underpayments and payments 
received after the date due. These charges include production and 
minimum royalties; assessments for liquidated damages; administrative 
fees and payments

[[Page 164]]

by purchasers of royalty taken-in-kind; or any other payments, fees, or 
assessments that a lessee/operator/payor/permittee/royalty taken-in-kind 
purchaser is required to pay by a specified date. The failure to pay 
past due amounts, including late payment charges, will result in the 
initiation of other enforcement proceedings.
    (e) An overpayment on a lease or leases, excluding rental payments, 
may be offset against an underpayment on a different lease or leases to 
determine a net underpayment on which interest is due pursuant to 
conditions specified in Sec. 218.42.

[47 FR 22528, May 25, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983, 
and amended at 49 FR 37347, Sept. 21, 1984; 52 FR 23815, June 25, 1987; 
57 FR 41868, Sept. 14, 1992; 57 FR 62206, Dec. 30, 1992]



Sec. 218.151  Rentals.

    (a) Except for leases issued subject to net profit sharing 
provisions, an annual rental shall be due and payable in advance, at the 
rate specified in the oil and gas leases, on the first day of each lease 
year prior to discovery of oil or gas on the lease.
    (b) The owner of any lease created by the segregation of a portion 
of a producing lease which is not subject to net profit sharing 
provisions and on which segregated portion there is no production, 
actual or allocated, shall pay an annual rental for such segregated 
portion at the rate per acre or hectare specified in the lease. This 
rental shall be payable each lease year following the year in which the 
segregation became effective and prior to a discovery on such segregated 
portion.
    (c) Annual rental paid in any year shall be in addition to, and 
shall not be credited against, any royalties due from production.
    (d) An annual rental on a lease for a mineral other than oil or gas, 
shall be due and payable, in advance, on the first day of each lease 
year prior to discovery in paying quantities, at a rate specified in the 
lease form.
    (e) For leases issued subject to the net profit sharing provisions, 
annual rental payments shall be due and payable in advance, on the first 
day of each lease year which commences prior to the date the first 
profit share payment becomes due. The owner of any lease created by the 
segreation of a portion of a lease subject to net profit sharing 
provisions, shall pay an annual rental for such segregated portion at 
the rate per acre or hectare specified in the lease. This rental shall 
be payable each year following the year in which the segregation becomes 
effective and shall continue to be due and payable, in advance, on the 
first day of each year which commences prior to the date the first 
profit share payment becomes due.

[44 FR 38276, June 29, 1979, as amended at 45 FR 69175, Oct. 17, 1980; 
47 FR 25972, June 16, 1982. Redesignated at 47 FR 47006, Oct. 22, 1982, 
and at 48 FR 35641, Aug. 5, 1983]



Sec. 218.152  Fishermen's Contingency Fund.

    Upon the establishment of the Fishermen's Contingency Fund, any 
holder of a lease issued or maintained under the Outer Continental Shelf 
Lands Act and any holder of an exploration permit or of an easement or 
right-of-way for the construction of a pipeline, shall pay an amount 
specified by the Director, MMS, who shall assess and collect the 
specified amount from each holder and deposit it into the Fund. With 
respect to prelease exploratory drilling permits, the amount will be 
collected at the time of issuance of the permit.

[52 FR 5458, Feb. 23, 1987]
Sec. 218.153  [Reserved]



Sec. 218.154  Effect of suspensions on royalty and rental.

    (a) If under the provisions of 30 CFR 250.10 (b)(2) through (b)(4), 
the Regional Supervisor, with respect to any lease, directs the 
suspension of both operations and production, or, with respect to a 
lease on which there is no producible well, directs the suspension of 
operations, no payment of rental or minimum royalty shall be required 
for or during the period of suspension.
    (b) The lessee shall not be relieved of the obligation to pay 
rental, minimum royalty or royalty for or during the period of 
suspension if the Regional Supervisor:
    (1) Under the provisions of 30 CFR 250.10(a) approves, at the 
request of a

[[Page 165]]

lessee, the suspension of operations or production, or both, or
    (2) Under the provisions of 30 CFR 250.10(b)(1), (b)(5) through 
(b)(7), or (c) suspends any operation, including production.
    (c) If the lease anniversary date falls within a period of 
suspension for which no rental or minimum royalty payments are required 
under paragraph (a) of this section, the prorated rentals or minimum 
royalties are due and payable as of the date the suspension period 
terminates. These amounts shall be computed and notice thereof given the 
lessee. The lessee shall pay the amount due within 30 days after receipt 
of such notice. The anniversary date of a lease shall not change by 
reason of any period of lease suspension or rental or royalty relief 
resulting therefrom.

[44 FR 38276, June 29, 1979; 44 FR 55380, Sept. 26, 1979. Redesignated 
and amended at 47 FR 47006, 47007, Oct. 22, 1982. Further redesignated 
at 48 FR 35641, Aug. 5, 1983 and amended at 51 FR 19063, May 27, 1986; 
54 FR 50616, Dec. 8, 1989]



Sec. 218.155  Method of payment.

    (a) Payment of royalties and rentals. With the exception of first-
year rental, the payor shall tender all payments in accordance with 
Sec. 218.51 of this part. First-year rental shall be paid in accordance 
with paragraph (c) of this section.
    (b) Payment of the one-fifth bonus bid amount. (1) Each lease bid 
must include a payment for the one-fifth bonus bid deposit amount unless 
the bidder is otherwise directed by the Secretary. Further instructions 
on how to make payment with the bid will be included in the notice of 
each lease offering. EFT may be used as a method of payment for the one-
fifth bonus bid amount.
    (2) Beginning with lease offerings held after February 1, 1984, the 
one-fifth bonus amount received from a high bidder shall be deposited 
into an escrow account created pursuant to an agreement between the 
Departments of the Interior and Treasury, pending acceptance or 
rejection of the bid. The one-fifth bonus funds will be invested in 
public debt securities. Investment of this amount by the U.S. Government 
does not indicate acceptance of the bid. The one-fifth bonus checks 
submitted with bids other than the highest valid bid shall be returned 
to respective bidders after bids are opened, recorded, and ranked. 
Return of such checks will not affect the status, validity, or ranking 
of bids. The one-fifth bonus bid amount received from any high bidder 
and held by the Government pending acceptance or rejection, will be 
returned with actual interest earned, if the bid is subsequently 
rejected. The interest accrued during the period held in the account 
pending acceptance or rejection of the bid will accrue to the Government 
when the bid is accepted.
    (c) Payment of the four-fifths bonus bid amount and the first year's 
rental. Payment shall be made to MMS by EFT unless otherwise directed by 
the Secretary. The payment by EFT via the FRCS must be received by the 
Federal Reserve Bank of New York no later than noon, eastern standard 
time, on the 11th business day after receipt of the lease forms by the 
successful bidder. A ``business day'' is considered to be a day on which 
the OCS regional office issuing the lease is open for business. The 
lease will not be executed by the appropriate MMS official until payment 
is received. Failure to remit by EFT or as directed by the Secretary 
within the time specified above will result in forfeiture of the one-
fifth bonus bid amount and the lease will not be executed by the 
appropriate MMS official. Payors will not be held responsible for late 
payment due to actions beyond their control, such as mechanical or 
systems failure of FRCS or FDS. Payors will be held responsible for 
incorrect actions of their bank which result in late payments. A 2-day 
grace period will be allowed to make up a deficient payment, but a late 
payment charge will be assessed for this late payment and a penalty will 
also be assessed if appropriate. Late payment charges will be assessed 
in accordance with Subpart B of this part.
    (d) General. (1) Payors using the appropriate means of payment (EFT, 
check, etc.) may pay for multiple lease obligations with a single 
remittance but must ensure that the payment complies with subpart B of 
this part and the remittance advice adequately

[[Page 166]]

identifies the single payment. The format to be used for such 
identification will be provided by the MMS Accounting Center.
    (2) Where to pay.
    (3) The MMS mailing addresses for payments to MMS are specified in 
Sec. 218.51 (f)(1) and (f)(2).
    (4) Payments received at the MMS addresses after 4 p.m. mountain 
time are considered received the following business day.
    (e) Miscellaneous payments. Payments shall be made to the manager of 
the appropriate Outer Continental Shelf field office by cash, check or 
bank draft payable to ``Department of the Interior--MMS'' for 
miscellaneous payments such as:
    (1) Pipeline rights-of-way application filing fees and rentals, 
pipeline accessory site rentals and application fees, and other related 
costs.
    (2) Filing and approval fees for transfers of interest in leases.

[49 FR 8605, Mar. 8, 1984, as amended at 52 FR 23815, June 25, 1987; 53 
FR 43201, Oct. 26, 1988; 57 FR 41868, Sept. 14, 1992; 62 FR 19499, Apr. 
22, 1997]



Sec. 218.156   Definitions.

    Terms used in this subpart have the same meaning as in 30 U.S.C. 
1702.

[52 FR 23815, June 25, 1987]



                   Subpart E--Solid Minerals--General



Sec. 218.200   Payment of royalties, rentals, and deferred bonuses.

    As specified under the provisions of the lease, the lessee shall 
submit all rental and deferred bonus payments when due and shall pay in 
value all royalties in the amount determined by MMS to be due.

[52 FR 23815, June 25, 1987]



Sec. 218.201  Method of payment.

    The payor shall tender all payments in accordance with 30 CFR 
218.51.

[52 FR 23815, June 25, 1987]



Sec. 218.202  Late payment or underpayment charges.

    (a) The failure to make timely or proper payment of any monies due 
pursuant to leases and contracts subject to these rules will result in 
the collection by MMS of the full amount past due plus a late payment 
charge. Exceptions to this late payment charge may be granted when 
estimated payments on minerals production have already been made timely 
and otherwise in accordance with instructions provided by MMS to the 
operator/lessee. However, late payment charges assessed with respect to 
any Indian lease, permit, or contract shall be collected and paid to the 
Indian or tribe to which the amount overdue is owed.
    (b) Late payment charges will be assessed on any late payment or 
underpayment from the date that the payment was due until the date that 
the payment was received at the MMS addresses specified in 218.51(f)(1) 
and (f)(2). Payments received at the specified MMS addresses after 4 
p.m. mountain time are considered received the following business day.
    (c) The interest charge on late payments shall be at the 
underpayment rate established by section 6621(a)(2) of the Internal 
Revenue Code, 26 U.S.C. 6621(a)(2).
    (d) Interest will be charged only on the amount of the payment not 
received by the designated due date. Interest will be charged only for 
the number of days the payment is late.
    (e) Late payment charges apply to all underpayments and payments 
received after the date due. These charges include production, minimum, 
or advance royalties; assessments for liquidated damages; or any other 
payments, fees, or assessments that an operator/lessee is required to 
pay by a specified date. The failure to pay past due payments, including 
late payment charges, will result in the initiation of other enforcement 
proceedings.
    (f) An overpayment on a lease or leases may be offset against an 
underpayment on a different lease or leases to determine a net 
underpayment on which interest is due pursuant to conditions specified 
in Sec. 218.42.

[47 FR 33195, July 30, 1982; 47 FR 53366, Nov. 26, 1982. Redesignated at 
48 FR 35641, Aug. 5, 1983, and further redesignated at 52 FR 23815, June 
25, 1987; 57 FR 41868, Sept. 14, 1992; 57 FR 62207, Dec. 30, 1992; 59 FR 
14559, Mar. 29, 1994]

[[Page 167]]



Sec. 218.203  Recoupment of overpayments on Indian mineral leases.

    (a) Whenever an overpayment is made under an Indian solid mineral 
lease, a payor may recoup the overpayment through a recoupment on Form 
MMS-2014 against the current month's royalties or other revenues owed on 
the same lease. However, for any month a payor may not recoup more than 
50 percent of the royalties or other revenues owed in that month under 
an individual allotted lease or more than 100 percent of the royalties 
or other revenues owed in that month under a tribal lease.
    (b) With written permission authorized by tribal statute or 
resolution, a payor may recoup an overpayment against royalties or other 
revenues owed in that month under other leases for which that tribe is 
the lessor. A copy of the tribe's written permission must be furnished 
to MMS pursuant to instructions for reporting recoupments in the ``AFS 
Payor Handbook--Solid Minerals.'' See 30 CFR 210.204. Recouping 
overpayments on one allotted lease from royalties paid to another 
allotted lease is specifically prohibited.
    (c) Overpayments subject to recoupment under this section include 
all payments made in excess of the required payment for royalty, rental, 
bonus, or other amounts owed as specified by statute, regulation, order, 
or terms of an Indian mineral lease.
    (d) The MMS Director or his/her designee may order any payor to not 
recoup any amount for such reasonable period of time as may be necessary 
for MMS to review the nature and amount of any claimed overpayment.

[60 FR 3087, Jan. 13, 1995]



                     Subpart F--Geothermal Resources



Sec. 218.300  Payment of royalties, rentals, and deferred bonuses.

    As specified under the provisions of the lease, the lessee shall 
submit all rental and deferred bonus payments when due and shall pay in 
value all royalties in the amount determined by MMS to be due.

[52 FR 23815, June 25, 1987]



Sec. 218.301  Method of payment.

    The payor shall tender all payments in accordance with 30 CFR 
218.51.

[52 FR 23815, June 25, 1987]



Sec. 218.302  Late payment or underpayment charges.

    (a) The failure to make timely or proper payment of any monies due 
pursuant to leases and contracts subject to these regulations will 
result in the collection by the Minerals Management Service (MMS) of the 
full amount past due plus a late payment charge. Exceptions to this late 
payment charge may be granted when estimated payments on minerals 
production have already been made timely and otherwise in accordance 
with the instructions provided by the MMS to the payor.
    (b) Late payment charges will be assessed on any late payment or 
underpayment from the date that the payment was due until the date that 
the payment was received at the MMS addresses specified in Sec. 218.51 
(f)(1) and (f)(2). Payments received at the specified MMS addresses 
after 4 p.m. Mountain Time are considered received the following 
business day.
    (c) The interest charge on late payments shall be at the 
underpayment rate established by section 6621(a)(2) of the Internal 
Revenue Code, 26 U.S.C. 6621(a)(2).
    (d) Interest will be charged only on the amount of the payment not 
received by the designated due date. Interest will be charged only for 
the number of days the payment is late.
    (e) Late payment charges apply to all underpayments and payments 
received after the date due. These charges include production, minimum, 
and compensatory royalties; assessments for liquidated damages; 
administrative fees and payments by purchasers of royalty taken-in-kind; 
or any other payments, fees, or assessments that a lessee/operator/
payor/royalty taken-in-kind purchaser is required to pay by a specified 
date. The failure to pay past due payments, including late payment 
charges, will result in the initiation of other enforcement proceedings.
    (f) An overpayment on a lease or leases may be offset against an 
underpayment on a different lease or leases

[[Page 168]]

to determine a net underpayment on which interest is due pursuant to 
conditions specified in Sec. 218.42.

[47 FR 22528, May 25, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983, 
and further redesignated at 51 FR 15767, Apr. 28, 1986 and 52 FR 23815, 
June 25, 1987; 57 FR 41868, Sept. 14, 1992; 57 FR 62207, Dec. 30, 1992; 
59 FR 14559, Mar. 29, 1994]



                   Subpart G--Indian Lands [Reserved]



PART 219--DISTRIBUTION AND DISBURSEMENT OF ROYALTIES, RENTALS, AND BONUSES--Table of Contents




                 Subpart A--General Provision [Reserved]

               Subpart B--Oil and Gas, General [Reserved]

                     Subpart C--Oil and Gas, Onshore

Sec.
219.100  Timing of payment to States.
219.101  Receipts subject to an interest charge.
219.102  Method of payment.
219.103  Payments to Indian accounts.
219.104  Explanation of payments to States and Indian tribes.
219.105  Definitions.

    Authority: Section 104, Pub. L. 97-451, 96 Stat. 2451 (30 U.S.C. 
1714).

    Source: 49 FR 37347, Sept. 21, 1984, unless otherwise noted.



                Subpart A--General Provisions [Reserved]



               Subpart B--Oil and Gas, General [Reserved]



                     Subpart C--Oil and Gas, Onshore



Sec. 219.100  Timing of payment to States.

    A State's share of mineral leasing revenues shall be paid to the 
State not later than the last business day of the month in which the 
U.S. Treasury issues a warrant authorizing the disbursement, except for 
any portion of such revenues which is under challenge and placed in a 
suspense account pending resolution of a dispute.



Sec. 219.101   Receipts subject to an interest charge.

    (a) Subject to the availability of appropriations, the Minerals 
Management Service (MMS) shall pay the State its proportionate share of 
any interest charge for royalty and related monies that are placed in a 
suspense account pending resolution of matters which will allow 
distribution and disbursement. Such monies not disbursed by the last 
business day of the month following receipt by MMS shall accrue interest 
until paid.
    (b) Upon resolution, the suspended monies found due in paragraph (a) 
of this section, plus interest, shall be disbursed to the State under 
the provisions of Sec. 219.100.
    (c) Paragraph (a) of this section shall apply to revenues which 
cannot be disbursed to the State because the payor/lessee provided 
incorrect, inadequate, or incomplete information to MMS which prevented 
MMS from properly identifying the payment to the proper recipient.



Sec. 219.102  Method of payment.

    The MMS shall disburse monies to a State either by Treasury check or 
by Electronic Funds Transfer (EFT). Should a State prefer to receive its 
payment by EFT, it should request this payment method in writing to the 
Minerals Management Service, Royalty Management Program, P.O. Box 5760, 
Denver, Colorado 80217-5760.

[57 FR 41868, Sept. 14, 1992, as amended at 58 FR 64903, Dec. 10, 1993]



Sec. 219.103  Payments to Indian accounts.

    Mineral revenues received from Indian leases shall be transferred to 
the appropriate Indian accounts managed by the Bureau of Indian Affairs 
(BIA) for allotted and tribal revenues. These accounts are specifically 
designated Treasury accounts. Revenues shall be transferred to the 
Indian accounts at the earliest practicable date after such funds are 
received, but in no case later than the last business day of the month 
in which revenues are received by the MMS.

[[Page 169]]



Sec. 219.104  Explanation of payments to States and Indian tribes.

    (a) Payments to States and BIA on behalf of Indian tribes or Indian 
allottees discussed in this part shall be described in Explanation of 
Payment reports prepared by the MMS. These reports will be at the lease 
level and shall include a description of the type of payment being made, 
the period covered by the payment, the source of the payment, sales 
amounts upon which the payment is based, the royalty rate, and the unit 
value. Should any State or Indian tribe desire additional information 
pertaining to mineral revenue payments, the State or tribe may request 
this information from the MMS.
    (b) The report shall be provided to: (1) States not later than the 
10th day of the month following the month in which MMS disburses the 
State's share of royalties and related monies; (2) the BIA on behalf of 
tribes and Indian allottees not later than the 10th day of the month 
following the month the funds are disbursed by MMS.
    (c) Revenues that cannot be distributed to States, tribes, or Indian 
allottees because the payor/lessee provided incorrect, inadequate, or 
incomplete information, preventing MMS from properly identifying the 
payment to the proper recipient, shall not be included in the reports 
until the problem is resolved.



Sec. 219.105  Definitions.

    Terms used in this subpart shall have the same meaning as in 30 
U.S.C. 1702.



PART 220--ACCOUNTING PROCEDURES FOR DETERMINING NET PROFIT SHARE PAYMENT FOR OUTER CONTINENTAL SHELF OIL AND GAS LEASES--Table of Contents




Sec.
220.001  Purpose and scope.
220.002  Definitions.
220.003  Information collection.
220.010  NPSL capital account.
220.011  Schedule of allowable direct and allocable joint costs and 
          credits.
220.012  Overhead allowance.
220.013  Unallowable costs.
220.014  Allocation of joint costs and credits.
220.015  Pricing of materiel purchases, transfers, and dispositions.
220.020  Calculation of the allowance for capital recovery.
220.021  Determination of net profit share base.
220.022  Calculation of net profit share payment.
220.030  Maintenance of records.
220.031  Reporting and payment requirements.
220.032  Inventories.
220.033  Audits.
220.034  Redetermination and appeals.

    Authority: Sec. 205, Pub. L. 95-372, 92 Stat. 643 (43 U.S.C. 1337).

    Source: 45 FR 36800, May 30, 1980, unless otherwise noted. 
Redesignated at 48 FR 1182, Jan. 11, 1983, and at 48 FR 35642, Aug. 5, 
1983.



Sec. 220.001  Purpose and scope.

    (a) This part 220 establishes accounting procedures for determining 
the net profit share base and calculating net profit share payments due 
the United States for the production of oil and gas from OCS leases.
    (b) The procedures established by this part 220 apply to any OCS 
lease issued by the Department of the Interior under any bidding system 
established by Sec. 260.110(a) of this chapter which has a net profit 
share component.

[45 FR 36800, May 30, 1980, as amended at 46 FR 29689, June 2, 1981. 
Redesignated at 48 FR 1182, Jan. 11, 1983, and at 48 FR 35642, Aug. 5, 
1983]



Sec. 220.002  Definitions.

    For purposes of this part 220:
    Allowance for capital recovery means the amount calculated according 
to procedures specified in Sec. 220.020. This amount allows a premium 
for risk initially undertaken by the lessee and a return on investment 
made during the capital recovery period. It is provided in lieu of 
interest on equipment and materiel charged to the NPSL capital account.
    Capital recovery period means the period of time that begins on the 
date of issuance of the NPSL and ends on the last day of the month 
during which the sooner of the following occurs:
    (1) The lessee completes the last well on the first platform 
specified in the development and production plan originally approved by 
the MMS, with any approved amendments thereto, and installation of 
wellhead equipment. In the event the last well is dry, then the

[[Page 170]]

capital recovery period shall be deemed to have ended with the 
determination that the last well is non-productive;
    (2) The balance in the NPSL capital account changes from a debit 
balance to a credit balance; or
    (3) The lessee, at his election, chooses to terminate the capital 
recovery period. A decision to terminate the capital recovery period 
prior to the events specified in paragraphs (a) (1) and (2) of this 
definition shall be communicated in writing to the Director and shall be 
irrevocable.
    Controllable materiel means materiel which at the time is so 
classified in the Materiel Classification Manual as most recently 
recommended by the Council of Petroleum Accountants Societies of North 
America.
    Cost means an expenditure or an accrual incurred by a lessee in 
conducting NPSL operations.
    Cost pool means a grouping of costs identified with more than one 
OCS lease, whether the leases are NPSLs or other types of leases.
    Credit means a payment, rebate, reimbursement to a lessee, or other 
reduction in cost or increase in revenue attributable to NPSL 
operations.
    Direct cost means any cost listed in Sec. 220.011 that benefits only 
NPSL operations.
    Director means the Director of MMS, Washington, D.C., or his 
delegate.
    Field employee means an employee below a first level supervisor who 
is directly employed in the NPSL project area.
    First level supervisor means an employee whose primary function in 
NPSL operations is the direct supervision of other employees and/or 
contract labor directly employed on the NPSL project area in a field 
operating capacity.
    G & G means geological, geophysical, geochemical and other similar 
investigations carried out on the NPSL tract.
    Joint cost means any cost listed in Sec. 220.011 that benefits NPSL 
operations and one or more other operations of the lessee or an outside 
party.
    Lessee means a person authorized by an OCS lease, or an approved 
assignment thereof, to develop and produce oil and gas, including all 
parties holding such authority by or through the lessee, and the person 
designated to conduct NPSL operations.
    Lessee's cost of allowed employee absence means the lessee's cost of 
holiday, vacation, sickness, disability benefits, jury duty and other 
customary excused allowances.
    Materiel means equipment, apparatus, and supplies.
    Net profit share base means the end of the month credit balance in 
the NPSL capital account determined pursuant to Sec. 220.021. The net 
profit share base is the production revenue remaining after subtracting 
all allowable costs and adding all allowable credits (including 
production revenue) in accordance with the procedures established by 
this part 220.
    Net profit share payment means the portion of the net profit share 
base payable to the United States.
    Net profit share rate means the percentage share of the net profit 
share base payable to the United States. The percentage share may be 
fixed in the notice of OCS lease sale or be the bid variable, depending 
upon the bidding system used, as established by Sec. 260.110(a) of this 
chapter.
    NPSL means a net profit share lease, which is an OCS lease that 
provides for payment to the United States of a percentage share of the 
net profits for production of oil and gas from the tract. This 
percentage share may be fixed in the notice of OCS lease sale or be the 
bid variable, depending on the bidding system used, as established by 
Sec. 260.110(a) of this chapter.
    NPSL operations means all activities subsequent to issuance of the 
NPSL necessary and proper for the exploration, development, operation, 
maintenance, and final abandonment of the NPSL property.
    NPSL project area means the NPSL tract, offshore facilities, and 
shore base facilities.
    NPSL property means the NPSL tract, and materiel and offshore 
facilities acquired for use in NPSL operations and that are installed 
and/or used on the NPSL tract.
    NPSL tract means a tract subject to an NPSL.
    OCS lease means a Federal lease for oil and gas issued under the 
OCSLA.

[[Page 171]]

    OCS lease sale means the DOI proceeding by which leases for certain 
OCS tracts are offered for sale by competitive bidding and during which 
bids are received, announced, and recorded.
    Offshore facilities means platform and support systems located 
offshore that are necessary to conduct NPSL operations, e.g., oil and 
gas handling facilities, living quarters, offices, shops, cranes, 
electrical supply equipment and systems, fuel and water storage and 
piping, heliport, marine docking installations, communication 
facilities, and navigation aids.
    Outside party means any person who is not a lessee.
    Person means person as defined in part 260 of this chapter.
    Personal expenses means travel and other reasonable reimbursable 
expenses of lessee's employees.
    Production means all oil, gas, or other hydrocarbon products 
produced, removed, saved, or sold from the NPSL property. Gas and 
liquids of all kinds are included in production. Production includes the 
allocated share of production from a unit of which the NPSL is a part.
    Production revenue means the value of all production attributable to 
an NPSL property, which value is determined in accordance with 
Sec. 260.110(b) of this chapter.
    Railway receiving point or recognized barge terminal means the 
location that a vendor would use in determining the sale price to the 
lessee of new materiel to be delivered to the NPSL project area.
    Reliable supply store means a recognized source or common stock 
point for the particular materiel involved.
    Shore base facilities means onshore facilities necessary for NPSL 
operations, including:
    (1) Shore base support facilities, e.g., a receiving and trans-
shipment point for materiel, staging area for shuttling personnel to and 
from the NPSL tract, a communication, scheduling, and dispatching 
center; and
    (2) Shore base production facilities, e.g., pumps, separating 
facilities, gas plants, and tankage for production from the NPSL tract.
    Technical employees means those employees having special and 
specific engineering, geological or other professional skills, and whose 
primary function in NPSL operations is the handling and resolution of 
specific operating conditions and problems for the benefit of NPSL 
operations.
    Tract means land located on the OCS that is offered for lease 
through an OCS lease sale and that is identified by a leasing map or an 
official protraction diagram prepared by DOI.

[45 FR 36800, May 30, 1980, as amended at 46 FR 29689, June 2, 1981. 
Redesignated and amended at 48 FR 1182, Jan. 11, 1983. Redesignated at 
48 FR 35642, Aug. 5, 1983]



Sec. 220.003  Information collection.

    (a) The information collection requirements of this part have been 
approved by OMB under 44 U.S.C. 3501 et seq. and assigned OMB Clearance 
Number 1010-0073. The information will be used to determine all 
allowable direct and allocable joint costs incurred during the term of 
the lease, appropriate overhead allowances permitted on these costs 
pursuant to Sec. 220.012, and allowances for capital recovery calculated 
pursuant to Sec. 220.020. The information collection is mandatory in 
accordance with the Federal Oil and Gas Royalty Management Act of 1982, 
30 U.S.C. 1701 et seq.
    (b) Public reporting burden is estimated to average 16 hours for 
each annual and monthly lease report, including time spent reviewing 
instructions, searching existing data sources, gathering and maintaining 
the data needed, and completing and reviewing the collection of 
information. Send comments regarding the burden estimate or any other 
aspect of this collection of information, including suggestions for 
reducing burden, to the Information Collection Clearance Officer, 
Minerals Management Service, 281 Elden Street, Herndon, Virginia 22070; 
and to the Office of Information and Regulatory Affairs, Office of 
Management and Budget, Paperwork Reduction Project 1010-0073, 
Washington, DC 20503.

[57 FR 41868, Sept. 14, 1992, as amended at 58 FR 64903, Dec. 10, 1993]



Sec. 220.010  NPSL capital account.

    (a) For each NPSL tract, an NPSL capital account shall be 
established and maintained by the lessee for NPSL

[[Page 172]]

operations. The NPSL capital account shall include debit entries for all 
allowable direct and allocable joint costs incurred during the term of 
the lease, appropriate overhead allowances permitted on these costs 
pursuant to Sec. 220.012, and allowances for capital recovery calculated 
pursuant to Sec. 220.020. The NPSL capital account shall be credited 
with production revenues attributable to the NPSL and any other credits 
arising from NPSL activities.
    (b) The NPSL capital account shall be kept on an accrual basis.



Sec. 220.011  Schedule of allowable direct and allocable joint costs and credits.

    The costs and credits specified in paragraphs (a) through (p) of 
this section may be charged direct, or allocated to NPSL operations, as 
appropriate, in accordance with Sec. 220.014.
    (a) Lease rental. The rent paid by the lessee for the NPSL tract is 
allowable.
    (b) Labor. (1)(i) Salaries and wages of lessee's field employees, 
first level supervisors and technical employees employed in the NPSL 
project area in NPSL operations are allowable if such costs are not 
charged under paragraph (g) of this section.
    (ii) Salaries and wages of technical employees within technical 
branches of the lessee's organization who are either temporarily or 
permanently assigned to, and directly employed in NPSL operations are 
allowable provided that such employees work ``full time'' on some 
particular aspect of NPSL operations or some specific technical problem. 
Excluded from this category are employees assigned a role in NPSL 
operations as a duty collateral with other duties that do not directly 
benefit NPSL operations.
    (iii) Salaries and wages of technical employees within technical 
branches of the lessee's organization who are assigned technical tasks 
directly related to NPSL operations may be allowable. Costs may be 
charged to the NPSL if supported by adequate time records showing the 
nature of the task and the hours spent on that task.
    (2) Lessee's cost of allowed employee absence paid to employees 
whose salaries and wages are chargeable to NPSL operations under 
paragraphs (b)(1) (i) and (ii) of this section are allowable.
    (3) Expenditures or contributions made pursuant to assessments 
imposed by governmental authority that are applicable to lessee's costs 
chargeable to NPSL operations under paragraphs (b)(1) (i) and (ii) and 
(b)(2) of this section are allowable.
    (4) Reasonable personal expenses, including allowable relocation 
costs of employees whose salaries and wages are chargeable to NPSL 
operations under paragraphs (b)(1) (i) and (ii) of this section and that 
are paid by the lessee or for which the employees are reimbursed under 
the lessee's normal practice are allowable except as limited by 
Sec. 220.013(g).
    (i) Allowable relocation costs include:
    (A) Travel expenses, including transportation, lodging, subsistence, 
and reasonable incidental expenses of the employee and members of his 
immediate family and transportation of his household and personal 
effects to the new location.
    (B) Other necessary and reasonable expenses normally incident to 
relocation, such as costs of cancelling an unexpired lease, 
disconnecting and reinstalling household applicances, and purchases of 
insurance against damages to or loss of personal property are allowable. 
Costs of cancelling an unexpired lease shall not exceed three times the 
monthly rental.
    (C) Closing costs (i.e. brokerage fees, legal fees, appraisal fees, 
etc.) for the sale of the employee's actual residence when notified of 
the transfer are allowable; and
    (D) Continuing costs of ownership of the vacant former actual 
residence being sold, such as continuing mortgage principal and interest 
payments, maintenance of building and grounds (exclusive of fixing-up 
expenses), utilities, taxes, property insurance, etc., after settlement 
date of lease or date of new permanent residence are allowable.
    (ii) The combined total of costs listed in paragraphs (b)(4)(i) (C) 
through (D) of this section shall not exceed 8 percent of the sales 
price of the property sold.

[[Page 173]]

    (iii) Section 220.013(g) specifies employee relocation expenses that 
are not allowable as a charge to NPSL operations.
    (5) Lessee's current costs of established plans for employee's group 
life insurance, hospitalization, pension, retirement, stock purchase, 
thrift, bonds, and other benefit plans of a like nature that are made 
available to all of lessee's employees on an equitable basis, applicable 
to lessee's labor cost chargeable to NPSL operations under paragraphs 
(b)(1) (i) and (ii) and (b)(2) of this section, are allowable. The 
amount of these charges shall be lessee's actual cost not to exceed 23 
percent of the total charges under paragraphs (b)(1) (i) and (ii) and 
(b)(2) except that the Director may from time to time establish a 
different maximum percentage.
    (6) Charges for expenses incurred under paragraphs (b)(2) through 
(b)(5) of this section may be made to NPSL accounts on a ``when and as 
paid'' basis or by a percentage assessment method. If the percentage 
assessment method is used, it shall be based upon the lessee's actual 
cost experience expressed as a percentage of costs chargeable under 
paragraphs (b)(1) (i) and (ii) and (b)(2) of this section. Under either 
method the lessee's own cost of administering the plans and paying the 
salaries and benefits defined in this paragraph shall be excluded. In 
determining actual cost experience of an employee benefit plan, any 
dividend or refunds received that are applicable to insurance or annuity 
policies shall be used to reduce the cost of such policies.
    (c) Materiel. (1) Materiel purchased or furnish by a lessee as NPSL 
property shall be charged or credited at amounts specified in 
Sec. 220.015. The purchase and inventorying of materiel is subject to 
the conditions and provisions in Sec. 220.032.
    (2) Charges to an NPSL account shall be made only for such materiel 
purchased or furnished as NPSL property as is reasonably practical and 
consistent with efficient and economical operations. The accumulation of 
surplus stocks shall be avoided.
    (3) Credit for salvaged or returned materiel shall be made to the 
NPSL capital account. When the amount originally charged qualifies for 
the allowance for capital recovery in Sec. 220.020, the credit shall be 
calculated pursuant to Sec. 220.021(a)(3).
    (d) Transportation. Transportation of employees and materiel 
necessary for NPSL operations to, from, and within the NPSL project 
area, are allowable, but subject to the following limitations:
    (1) If materiel is moved to the NPSL project area, no charge shall 
be made to NPSL operations for a distance greater than the distance from 
the nearest reliable supply store, recognized barge terminal, or railway 
receiving point where like materiel is normally available, unless agreed 
to by the Director.
    (2) If surplus materiel is moved from the NPSL project area, no 
charge shall be made to NPSL operations for a distance greater than the 
distance to the nearest reliable supply store, recognized barge 
terminal, or railway receiving point unless agreed to by the Director. 
No charge shall be made to NPSL operations for moving materiel to other 
properties owned by or under the control of a lessee, unless agreed to 
by the Director.
    (3) In the application of paragraphs (d)(1) and (d)(2) of this 
section, there shall be no equalization of actual gross trucking costs 
of $200 or less, excluding accessorial charges.
    (e) Contract services. Except when excluded by paragraph (f) of this 
section and/or Sec. 220.013(c), the cost of services and utilities 
provided under contract by outside parties to the lessee and which 
constitute proper and necessary NPSL operations or support for NPSL 
operations, and rental charges paid to outside parties for the use of 
equipment used in the NPSL project area in support of NPSL operations, 
may be charged to NPSL operations subject to the following conditions 
and limitations:
    (1) Contract services (including professional consulting services 
and contract services of technical personnel) that are entirely 
performed in the NPSL project area and benefit exclusively NPSL 
operations may be charged at the rates specified in the contract.

[[Page 174]]

    (2) Contract services (including professional consulting services 
and contract services of technical personnel) that are entirely 
performed in the NPSL project area and benefit the NPSL operations and 
operations on other tracts must be allocated among all tracts benefited 
and only that portion representing services benefiting the NPSL tract 
charged to NPSL operations.
    (3) Contract services (including professional consulting services 
and contract services of technical personnel) that are performed at 
sites outside the NPSL project area may be charged to NPSL operations 
only if:
    (i) The contracted services charged to the NPSL operations benefit 
only the NPSL tract or support NPSL operations;
    (ii) The contract under which such services are provided deals 
exclusively with services benefiting the NPSL tract or NPSL operations, 
or the costs of the contract services which are applicable to the NPSL 
tract or NPSL operations are separately and specifically identified in 
the contract; and
    (iii) Services specified in the contract relate to the resolution of 
specific technical problems confronting NPSL operations, or specific 
engineering design problems related to equipment or facilities required 
for NPSL operations.
    (4) The cost of any contract service related to research and 
development is specifically excluded, as are contract services calling 
for feasibility studies not directly related to specific engineering 
design problems or alternatives for equipment and facilities required by 
NPSL operations.
    (f) Legal expenses. Expense of handling, investigating and settling 
litigation or claims, discharging of liens, payments of judgments and 
amounts paid for settlement of claims incurred in or resulting from NPSL 
operations, or necessary to protect or recover the NPSL property are 
allowable, except those costs listed in Sec. 220.013(f) as unallowable. 
This includes the salaries and wages of lessee's legal staff and the 
expense of outside attorneys who are assigned to matters described in 
this paragraph if supported by adequate time records showing the nature 
of the matter, its direct relationship to NPSL operations, and the hours 
spent on the matter.
    (g) Rental of equipment and facilities furnished by lessee. (1)(i) 
The NPSL capital account shall be charged for the use of equipment and 
facilities owned by a lessee that are proper and necessary for NPSL 
operations, including shore base and offshore facilities and pipelines 
from the tract to shore base production facilities, and that are not 
NPSL property. Rental charges shall be made at rates based upon actual 
costs of acquisition, construction, and operation. Such rates may 
include labor, the cost of setting up and dismantling equipment, 
maintenance, repairs, other operating expenses, insurance, taxes, 
depreciation (calculated using a method consistent with generally 
accepted accounting principles, consistently applied) and a return on 
the remaining undepreciated basis not to exceed 8 percent per year, 
except that the Director may from time to time establish a different 
maximum percentage. Any cost of acquiring real property in excess of 
that reasonably required to support the facilities furnished for NPSL 
operations shall not be included in the costs used to establish these 
rates. Rates charged shall not exceed average commercial rates for 
equipment and facilities of similar nature and capability currently 
prevailing in the vicinity of the NPSL project area.
    (ii) The term ``equipment and facilities'' is used in the broad 
sense to include equipment that may be mobile or semimobile and also 
installations that may be semipermanent or permanent in nature. Such 
equipment and facilities listed below shall be charged on the basis 
indicated.

------------------------------------------------------------------------
           Equipment/facilities                    Basis of charge      
------------------------------------------------------------------------
A. Mobile equipment:                                                    
  Aircraft................................  Hour.                       
  Automobiles.............................  Mile or hour.               
  Trucks..................................  Mile or hour.               
  Tractors................................  Hour.                       
  Bulldozers..............................  Hour.                       
  Mobile cranes...........................  Hour.                       
  Trailer-mounted test separators.........  Hour.                       
  Truck-mounted cement mixers.............  Hour.                       
  Boats...................................  Day or hour.                
  House trailers..........................  Day.                        
B. Semimobile equipment:                                                
  Drill rigs..............................  Foot or day.                
  Workover rigs...........................  Hour.                       

[[Page 175]]

                                                                        
  Pulling units...........................  Hour.                       
  Derricks................................  Day.                        
  Drilling tender.........................  Day.                        
  Barges..................................  Day.                        
C. Semipermanent installations:                                         
  Skid-mounted separators.................  Day or volume.              
  Skid-mounted compressors................  Day or volume.              
D. Permanent installations:                                             
  Compressor stations.....................  Volume.                     
  Saltwater disposal wells................  Volume or wells.            
  Source water wells and supply systems...  Volume.                     
  Roads...................................  Wells.                      
  Production/drilling platform............  Volume or wells.            
  Canals..................................  Wells.                      
  Dock....................................  Wells.                      
  Oil storage and loading facilities......  Volume.                     
  Gathering systems and pipeline..........  Volume.                     
  ACT systems.............................  Volume.                     
  Laboratory services (excluding research   Hour or unit.               
   work).                                                               
  Shore base production facilities........  Volume.                     
  Shore base support facilities...........  Wells.                      
E. Miscellaneous:                                                       
  Drill pipe..............................  Foot or day.                
  Casing setting tools....................  Day.                        
  Well testing equipment..................  Day.                        
------------------------------------------------------------------------

Equipment and facilities that are not listed shall be charged on a basis 
consistent with the nature of the use.
    (2) In lieu of charges in paragraph (g)(1) of this section, the 
lessee may elect to use average commercial rates prevailing in the 
vicinity of the NPSL project area less 20 percent. For automotive 
equipment, the lessee may elect to use rates established by the 
Director. For other equipment for which no commercial rate exists, the 
lessee shall submit the basis for determining such costs to the Director 
for approval.
    (h) Damages and losses to NPSL property. All costs necessary for the 
repair or replacement of NPSL property made necessary because of damages 
or losses incurred by fire, flood, storm, theft, accident, or other 
causes not covered by insurance, except those resulting from lessee's 
negligence or willful misconduct may be charged to the NPSL capital 
account. Any settlement received from an insurance carrier should be 
credited to NPSL operations when received.
    (i) Taxes. All taxes, except income taxes, profit share payments, 
and taxes based upon income, that are assessed or levied upon or in 
connection with NPSL operations and which have been paid by the lessee 
are allowable. Allowed taxes shall include, but not be limited to, 
production, severance, excise, ad valorem, and mineral taxes.
    (j) Insurance. (1) Net premiums paid for insurance required to be 
carried for NPSL operations are allowable. For NPSL operations in which 
the lessee may act as self-insurer for Workmen's Compensation and 
Employer's Liability, the lessee may include the risk under its self-
insurance program in providing coverage under State and Federal laws and 
charge NPSL operations at lessee's cost not to exceed manual rates.
    (2) NPSL operations shall be credited for all reimbursements for 
costs of damage to NPSL property or personal injury. Reimbursements for 
damaged NPSL property shall be credited as follows:
    (i) If the damaged NPSL property is replaced or repaired, to the 
NPSL capital account charged for the cost of replacement or repair; or
    (ii) If the damaged NPSL property is not replaced or repaired, to 
the NPSL capital account except that if the cost of the property 
originally qualified for the allowance for capital recovery in 
Sec. 220.020, the credit shall be calculated pursuant to 
Sec. 220.021(a)(3).
    (k) Communications. Costs of leasing, acquiring, installing, 
operating, repairing and maintaining communication systems, including 
radio, microwave facilities, and computer production controls for the 
NPSL operations are allowable. If communication facilities systems 
serving the NPSL tract serve operations and/or facilities outside the 
NPSL project area, charges to NPSL operations shall be made as provided 
in paragraph (g) of this section or shall be allocated to NPSL 
operations in accordance with Sec. 220.014.
    (l) Ecological and environmental. Costs incurred in the NPSL project 
area as a result of statutory regulations for archeological and 
geophysical surveys relative to identification and protection of 
cultural resources and other environmental or ecological surveys 
required by the Bureau of Land Management or other regulatory authority, 
may be charged to the NPSL capital account. Also, the costs to provide 
or have available pollution containment and removal equipment, including 
payments to organizations and/or funds which provide equipment and/or 
assistance in the event of oil spills or other

[[Page 176]]

environmental damage are allowable. The costs of actual control and 
cleanup of oil spills and resulting responsibilities required by 
applicable laws and regulations are allowable, except that a charge 
shall not be allowed for any such costs attributable to the lessee's 
negligence or willful misconduct.
    (m) Dry or bottom hole contributions. The costs of dry or bottom 
hole contributions made to obtain information about the structure or 
other characteristics of the geology underlying the NPSL tract are 
allowable.
    (n) Abandonment costs. Actual costs incurred in the plugging of 
wells, dismantling of platforms and other facilities and in the 
restoration of the NPSL project area shall be charged to the NPSL 
capital account only when incurred (i.e., not on an accrual basis), 
except that costs incurred after the cessation of production shall not 
be charged to the NPSL capital account. Abandonment costs in excess of 
offsetting revenues shall not form the basis of any claim against the 
United States.
    (o) Other costs. Any other costs not covered in paragraphs (a)-(n) 
of this section and not disallowed by Sec. 220.013 that are incurred by 
the lessee in the necessary and proper conduct of NPSL operation and are 
approved by the Director, are allowable. Approval of a plan of 
development and production for the NPSL tract by the Director shall be 
considered sufficient approval for these other costs provided they are 
separately identified in said plan of development and production. Such 
separate identification shall note the nature of these other costs and 
may include an estimate of their magnitude. Any cost approvals under 
this paragraph for which the specific amounts have not been itemized are 
presumed to be approved provided they fall within the limits for a 
prudent operator. Approval of costs under this paragraph shall be 
approval solely for the purposes of determining allowable costs and 
shall not preclude a subsequent adjustment at audit of the amount of 
such costs.
    (p) Other credits. Credit shall be given to the NPSL capital 
account, depending on when it is incurred, for NPSL property leased or 
used in non-NPSL operations, for the sale of information derived from 
test wells and G & G, and for any and all amounts earned or otherwise 
due lessee as a result of NPSL operations.



Sec. 220.012  Overhead allowance.

    (a) During the capital recovery period the overhead allowance shall 
be calculated on a percentage basis at the rate of 4 percent of 
allowable direct and allocable joint costs charged to the NPSL capital 
account, exclusive of costs specified in paragraph (c) of this section. 
This overhead allowance shall be debited to the NPSL capital account in 
accordance with Sec. 220.021(b)(2).
    (b) For each month after the end of the capital recovery period, an 
overhead allowance shall be calculated on a percentage basis at the rate 
of 10 percent of allowable direct and allocable joint costs charged to 
the NPSL capital account, exclusive of costs specified in paragraph (c) 
of this section. This overhead allowance shall be debited to the NPSL 
capital account in accordance with Sec. 220.021(c)(2).
    (c) Overhead shall not be charged on the value of:
    (1) Lease rental (Sec. 220.011(a));
    (2) Contract services (Sec. 220.011(e));
    (3) Taxes (Sec. 220.011(i));
    (4) Re-injected hydrocarbons, originally produced from the NPSL 
tract, that are charged under Sec. 220.011(c); and
    (5) Credits for materiel charged under Sec. 220.011(c) that are 
salvaged, returned, or used for the benefit of non-NPSL operations.



Sec. 220.013  Unallowable costs.

    The following costs shall not be charged as direct or joint costs to 
NPSL operations:
    (a) Bonus payments to the United States;
    (b) Interest (except as permitted under Sec. 220.011(g));
    (c) Depreciation, depletion, amortization, or any other charge for 
capital recovery for materiel charged to the NPSL capital account under 
Sec. 220.011(c), except as explicitly provided by the allowance for 
capital recovery calculated according to Sec. 220.020;
    (d) The cost of taking inventory;
    (e) Research and development costs;
    (f) The following legal expenses:
    (1) The costs of litigation against the Federal government;

[[Page 177]]

    (2) Fines or penalties levied by any Federal agency;
    (3) Settlement of claims or other litigation resulting from the 
lessee's violation of regulatory requirements or negligence; and
    (4) The cost of the lessee's legal staff or expense of outside 
attorneys, except as explicitly allowed under Sec. 220.011(f);
    (g) The following employee relocation costs (whether incurred by the 
employee or the lessee):
    (1) Loss on the sale of a home;
    (2) Purchase price of a home in the new location;
    (3) Payments for employee income taxes incident to reimbursed 
relocation costs; and
    (4) Any relocation cost in connection with an employee move that is 
for the primary benefit of the lessee's non-NPSL operations;
    (h) The lessee's own cost of administering employee benefit plans;
    (i) The cost of acquiring or constructing shore base facilities and 
real property improvements that are charged to NPSL operations on a 
rental basis under Sec. 220.011(g);
    (j) Rentals on any facilities, the investment costs of which have 
been charged either directly or as allocable joint costs, to the NPSL 
capital account; and
    (k) Pre-NPSL expenditures.



Sec. 220.014  Allocation of joint costs and credits.

    (a) Joint costs shall be grouped in cost pools for allocation to 
NPSL and non-NPSL operations in reasonable proportion to the beneficial 
or causal relationships which exist between a specific cost pool and the 
operations. That portion of a joint cost pool that may be allocated to 
NPSL operations is called an allocable joint cost.
    (b) The following allocation principles apply in allocating joint 
costs:
    (1) G & G. G & G shall be allocated on a line mile per tract basis.
    (2) Wages and salaries. Wages and salaries that are not charged as 
direct on the basis of time spent on a particular job shall be allocated 
on a reasonable and equitable basis.
    (3) Compensated personal absence, payroll taxes and personal 
expenses. These items shall be allocated on the same basis as wages and 
salaries.
    (4) Transportation costs. Transportation costs for employees that 
are not charged direct shall be allocated on the same basis as their 
wages and salaries.
    (c) Joint credits shall be allocated in the same manner as joint 
costs.
    (d) When the NPSL is made a part of a unit, the allowed costs shall 
be charged to the NPSL capital account on the basis specified in the 
unit operating agreement as approved by the Director. Revenues and other 
credits shall be made to the NPSL accounts on the same basis as 
specified in the approved operating agreement. Joint costs of an NPSL 
and a non-NPSL tract that are adjacent to one another and are on the 
same structure shall be allocated on a basis approved by the Director.



Sec. 220.015  Pricing of materiel purchases, transfers, and disposition.

    (a)(1) Purchased materiel. Except as provided in paragraph (a)(2)(i) 
of this section, materiel purchased for use in NPSL operations shall be 
charged to NPSL operations at the price paid, after deduction of any 
discounts received. Should any purchased materiel be defective or 
returned to a vendor for other reasons, the credit shall be allocated to 
NPSL operations when received by the lessee in accordance with 
Sec. 220.011(c)(3).
    (2) Transferred and disposal materiel. An item of materiel, which is 
acquired by the lessee for use in NPSL operations by means other than 
purchase or disposed of by any means, shall be priced according to this 
subparagraph:
    (i) Condition A (new) materiel. (A) Tubular goods, except line pipe, 
shall be priced at the current market price in effect on date of 
movement on a minimum carload or barge load weight basis, regardless of 
quantity transferred, equalized to the lowest published price ``free on 
board'' (f.o.b.) railway receiving point or recognized barge terminal 
nearest the NPSL tract where such materiel is normally available.
    (B) Line pipe. (1) Movement of less than 30,000 pounds shall be 
priced at the current price in effect at date of

[[Page 178]]

movement, as listed by a reliable supply store nearest the NPSL tract 
where such materiel is normally available.
    (2) Movement of 30,000 pounds or more shall be priced under the 
provisions for tubular goods pricing in paragraph (a)(2)(i)(A) of this 
section.
    (C) Other materiel shall be priced at the current price in effect at 
date of movement, as listed by a reliable supply store or f.o.b. railway 
receiving point nearest the NPSL tract where such materiel is normally 
available.
    (ii) Condition B (good used) materiel. Materiel in sound and 
serviceable condition and suitable for reuse without reconditioning:
    (A) Materiel transferred to the NPSL project area shall be priced at 
75 percent of current Condition A price.
    (B) Materiel transferred from the NPSL project area shall be priced:
    (1) At 75 percent of current Condition A price, if the materiel was 
originally charged to NPSL operations as Condition A materiel, or
    (2) At 65 percent of current Condition A price, if the materiel was 
originally charged to NPSL operations as Condition B materiel at 75 
percent of current Condition A price.
    (iii) Conditions C and D (other used) materiel--(A) Condition C. 
Materiel that is not in sound and serviceable condition and not suitable 
for its original function until after reconditioning shall be priced at 
50 percent of current Condition A price.
    (B) Condition D. Materiel no longer suitable for its original 
purposes but suitable for some other purpose shall be priced on a basis 
commensurate with its use and comparable with that of materiel normally 
used for such other purpose. If the materiel has no alternative use it 
should be priced at prevailing prices as scrap.
    (iv) Obsolete materiel. Materiel that is serviceable and usable for 
its original function and has a value less than Condition A, B, or C 
materiel may be valued at a price agreed to by the Director. Such price 
should be the equivalent of the value of the service rendered by such 
materiel.
    (b) Pricing conditions. (1) Loading and unloading costs shall be 
charged at a rate of 15 cents per hundred weight, or such other rate as 
may be set by the Director, on all tubular goods movements, in lieu of 
loading/unloading costs sustained, when the actual hauling costs of such 
tubular goods is equalized under provisions of Sec. 220.011(d).
    (2) Materiel involving erection costs shall be charged at the 
applicable percentage of the current knocked-down price of new materiel.
    (c) When materiel subject to paragraphs (a)(2) (ii) and (iii) of 
this section is transferred, the cost of reconditioning shall be borne 
by the receiving party.



Sec. 220.020  Calculation of the allowance for capital recovery.

    (a) For purposes of this section, the cost base for the allowance 
for capital recovery in a particular month shall consist of the sum of:
    (1) All allowable direct and allocable joint costs chargeable to the 
NPSL capital account during the month less any costs specified in 
Sec. 220.012(c); plus
    (2) The value of contract services chargeable to the NPSL capital 
account during the month pursuant to Sec. 220.011(e); plus
    (3) The capital recovery period overhead allowance, calculated in 
accordance with Sec. 220.012(a), that is chargeable to the NPSL capital 
account for the month; less
    (4) Production revenues and other credits received during the month.
    (b) If the cost base for a month is greater than zero (that is, if 
the sum of the charges specified in paragraphs (a) (1) through (3) of 
this section exceeds the value of production revenues and other 
credits), the allowance for capital recovery shall be calculated by 
multiplying the cost base by the capital recovery factor, and shall be 
debited to the NPSL capital account as specified in Sec. 220.021(b).
    (c) If the cost base for a month is less than zero, the allowance 
for capital recovery for the NPSL capital account shall be calculated by 
multiplying the resulting negative cost base by the capital recovery 
factor. The negative product of this calculation shall be debited to the 
NPSL capital account as specified in Sec. 220.021(b).
    (d) No allowance for capital recovery shall be calculated on the 
charges or

[[Page 179]]

credits related to any time period after the end of the capital recovery 
period.



Sec. 220.021  Determination of net profit share base.

    (a) During each month of the lease term, the NPSL capital account 
shall be:
    (1) Debited with allowable direct and allocable joint costs;
    (2) Credited with an amount reflecting the production revenues for 
the month, calculated in accordance with Sec. 260.110(b) of this 
chapter.
    (3) Credited with amounts properly credited back to the NPSL capital 
account as specified in Sec. 220.011(p). Credits associated with charges 
to the NPSL capital account during the capital recovery period, however, 
shall first be increased by the value of the credit multiplied by the 
recovery factor, before crediting that sum to the NPSL capital account.
    (b) At the end of each month of the lease term during the capital 
recovery period:
    (1) The transactions specified in paragraph (a) of this section 
shall be made to the NPSL capital account.
    (2) The capital recovery period overhead allowance shall be 
calculated in accordance with Sec. 220.012(a) and debited to the NPSL 
capital account.
    (3) The allowance for capital recovery shall be calculated in 
accordance with Sec. 220.020 and the allowance debited (or the negative 
allowance debited, as appropriate) to the NPSL capital account. (A debit 
entry of a negative allowance for capital recovery shall have the same 
effect as a credit entry of the absolute value of the allowance for 
capital recovery.)
    (4) The balance in the NPSL capital account shall be calculated. If, 
as a result of the accounting transactions described in paragraphs (b) 
(1) through (3) of this section, there is a credit balance in the NPSL 
capital account, the capital recovery period will be considered 
terminated as of this month. The credit balance will be forwarded to the 
next month, which will be the first month for which a profit share 
payment is due.
    (c) At the end of each month of the lease term following the end of 
the capital recovery period:
    (1) The transaction specified in paragraph (a) of this section shall 
be made to the NPSL capital account.
    (2) An overhead allowance shall be calculated in accordance with 
Sec. 220.012(b) and debited to the NPSL capital account.
    (3) The balance in the NPSL capital account shall be calculated.
    (d) If, as a result of the accounting transactions described in 
paragraph (c) of this section, there is a credit balance in the NPSL 
capital account, this credit balance is the net profit share base for 
that month. The opening debit and credit balances in the NPSL capital 
account for any month following a month in which there is a credit 
balance in the NPSL capital account (except as provided in paragraph 
(b)(4)) of this section shall be zero.
    (e) If, as a result of the accounting transactions described in 
paragraph (b) or (c) of this section, there is a debit balance in the 
NPSL capital account, this debit balance shall be the opening debit 
balance in the NPSL capital account for the following month.
    (f) Any credit balance in the NPSL capital account shall become the 
net profit share base as described in this section. Any debit balance in 
the NPSL capital account shall be maintained only insofar as necessary 
for the determination of profit share payments. Such debit balance shall 
not represent a claim against the United States.

[45 FR 36800, May 30, 1980. Redesignated at 48 FR 1182, Jan. 11, 1983, 
and at 48 FR 35642, Aug. 5, 1983, and amended at 55 FR 1210, Jan. 12, 
1990]



Sec. 220.022  Calculation of net profit share payment.

    The net profit share payment shall be calculated by multiplying the 
net profit share base calculated in accordance with Sec. 220.021 by the 
net profit share rate. The net profit share payment shall be paid to the 
United States in accordance with Sec. 220.031.



Sec. 220.030  Maintenance of records.

    (a) Each lessee subject to this part 220 shall establish and 
maintain such records as are necessary to determine for each NPSL:

[[Page 180]]

    (1) The volume and disposition of all oil and gas production saved, 
removed or sold for each month;
    (2) The value of all oil and gas production saved, removed or sold 
for each month;
    (3) The amount and description of costs and credits to the NPSL 
capital account;
    (4) The amount and description of all costs of acquisition, 
construction, and operation of equipment and facilities furnished by the 
lessee and charged to the NPSL capital account under Sec. 220.011(g). 
Such records shall include worksheets or other documents that indicate 
the method used to calculate the amount of each charge made under 
Sec. 220.011(g);
    (5) The cumulative balance of costs and credits to the NPSL capital 
account; and
    (6) The inventory of materiel.
    (b) The ledger cards showing the charges and credits to the NPSL 
capital account shall be maintained until thirty-six months after the 
cessation of NPSL operations by the lessee. All other documents, 
journals and records shall be maintained for thirty-six months from the 
due date or date of mailing of the statement of account on an NPSL, 
whichever comes later, except that nothing in these regulations shall 
limit the time of investigation or the need to produce records when 
prima facie evidence of fraud or willful misconduct is obtained with 
respect to the government's interest in the NPSL.



Sec. 220.031  Reporting and payment requirements.

    (a) Each lessee subject to this part shall file an annual report 
during the period from issuance of the NPSL until the first month in 
which production revenues are credited to the NPSL capital account. Such 
report shall list the costs incurred, including allowances applied, 
credits received, and the balance of the NPSL capital account. Not later 
than 60 days after the end of the first month in which production 
revenues are credited to the NPSL capital account, a final report 
relating to the period shall be filed.
    (b) Beginning with the first month in which production revenues are 
credited to the NPSL capital account, each lessee subject to this part 
220 shall file a report for each NPSL, not later than 60 days following 
the end of each month, containing the following information for the 
month for which the report is filed:
    (1) The volume and disposition of all oil and gas production saved, 
removed or sold;
    (2) The production revenue;
    (3) The amount and description of all costs and credits to the NPSL 
capital account;
    (4) The balance of the NPSL capital account; and
    (5) The net profit share base and net profit share payment due the 
United States and the monthly profit share of the lessee.
    (c) Each lessee subject to this part 220 shall submit, together with 
the report required by paragraph (b) of this section, any net profit 
share payment due the United States for the period covered by the 
report.
    (d) Each lessee subject to this part 220 shall file a report not 
later than 90 days after each inventory is taken, reporting the 
controllable materiel on hand, acquired, transferred or used.
    (e) Each lessee subject to this part 220 shall file a final report, 
not later than 60 days following the cessation of production, together 
with the appropriate net profit share payment, indicating the remaining 
balance and costs and credits to the NPSL capital account for the 
period.
    (f) Reports required by this section shall be filed with the 
Director, either separately or as part of the reports that are currently 
filed.
    (g) Interest shall be calculated at the prevailing rate or rates as 
published in the Bulletin to the Department of the Treasury Fiscal 
Requirement Manual, in effect for the period or periods over which the 
net profit share payment is owed, compounded monthly, on the amount of a 
net profit share payment, from the due date (60 days following the end 
of each month for which the payment was due) of a net profit share 
payment until such payment is received by the United States.



Sec. 220.032  Inventories.

    (a) The lessee is responsible for NPSL materiel and shall make 
proper and

[[Page 181]]

timely cost and credit notations for all materiel movements affecting 
NPSL property. The lessee shall provide only such materiel as may be 
required for immediate use or is consistent with practical, efficient, 
and economical operations. The accumulation of surplus stocks shall be 
avoided by proper materiel control, inventory and purchasing. The lessee 
shall make timely disposition of idle and surplus materiel through sale.
    (b) At reasonable intervals, but at least once every three years, 
inventories of controllable materiel shall be taken by the lessee. 
Written notice of intention to take inventory shall be given by the 
lessee at least 30 days before any inventory is to be taken so that the 
Director may be represented at the taking of inventory. Failure of the 
Director to be represented at an inventory shall bind the Director to 
accept the inventory taken by the lessee, except in the case of willful 
misrepresentation or fraud.
    (c) Inventory shall be valued with any generally accepted accounting 
method used by the lessee to value the same materiel for financial or 
income tax reporting purposes, provided that the method is consistently 
applied throughout the life of the materiel.
    (d) Reconciliation shall be made of a physical inventory with the 
NPSL capital account by the lessee, and a list of overages and shortages 
shall be available to the Director for audit as provided in 
Sec. 220.033. Inventory adjustments of controllable materiel shall be 
made by the lessee to the NPSL capital account for overages and 
shortages. Controllable materiel removed from physical inventory that 
has not been credited to NPSL operations under Sec. 220.015(a)(2) shall 
be credited to NPSL operations at its original value, except that when 
the cost of the materiel originally qualified for the allowance for 
capital recovery in Sec. 220.020, the credit shall be calculated 
pursuant to Sec. 220.021(a)(3).



Sec. 220.033  Audits.

    (a) The accounts of an NPSL lessee or of a contractor of the lessee 
which are related to NPSL operations shall be subject to audit by DOI or 
its appointed agent. Where possible, the auditor for DOI shall 
coordinate audit efforts with other nonoperators, if any. DOI shall have 
the right to initiate an audit any time within thirty-six months of the 
due date of the monthly statement that is to be audited or the date that 
the statement was mailed, whichever is later, provided, however, that 
audits may not be conducted any more frequently than once every year 
except upon a showing of fraud or willful misrepresentation.
    (b)(1) When nonoperators of an NPSL lease call an audit in 
accordance with the terms of their operating agreement, the Director 
shall be notified of the audit call in the same manner as the operator 
is notified. DOI may elect to send an auditor with the audit team 
specified by the nonoperators in lieu of calling for a separate audit by 
DOI.
    (2) If DOI determines to call for an audit, DOI shall notify the 
lessee of its audit call and set a time and place for the audit. Such a 
notice shall be sent at least thirty days before the suggested time for 
the audit to allow the nonoperators to join in DOI's audit in lieu of 
calling for their own audit. The place for the audit will normally be 
the place where the lessee maintains its records pertaining to the NPSL 
lease. The lessee shall send copies of the notice to the nonoperators on 
the lease. The lessee shall use reasonable effort to notify all 
nonoperators, but failure to include one or more nonoperators in the 
notification shall not void the notice.
    (3) When DOI calls for an audit, DOI may suggest the date and time 
when the audit may commence. The estimated duration of the audit may be 
mentioned to the lessee as well as to the other nonoperators who may 
elect to supply and auditor for their own audit purposes. The lessee's 
office where the audit will be held may be named or, if not known, 
inquired about. If a visit to a field plant or field office is 
contemplated by the government auditor, such a field trip may be 
mentioned. If DOI expresses a desire to review a period on which the 
thirty-six month time limitation has expired, it is the lessee's 
prerogative to allow the review or to request that DOI adhere to the 
time limitation specified in these regulations.

[[Page 182]]

    (c)(1) Exceptions to the accounting by the lessee, whether in favor 
of the government or the lessee, shall be noted in a report to the 
lessee. The lessee shall have 60 days from the mailing of a notice of 
exceptions to agree to the adjustments proposed by the DOI auditor or to 
object to the proposed adjustments. If the lessee accepts the proposed 
adjustments, the adjustment shall be booked in the month in which the 
lessee agrees to the adjustment, except where such adjustment would have 
resulted in a change in any net profit share payment due the United 
States. In such a case, there shall be a redetermination of the NPSL 
capital account pursuant to Sec. 220.034.
    (2) If the lessee disagrees with the adjustment, the lessee shall 
have the right to appeal the adjustment to the Director.
    (d) Upon receipt of an agreement by the government auditor that 
there are no required audit adjustments, upon final determination with 
respect to any audit adjustment proposed by the government auditor, or 
upon the lapse of thirty-six months from the due date or date of mailing 
of the statement of account on an NPSL lease, whichever comes later, the 
books shall be closed for audit adjustment purposes, except upon a 
showing of fraud or willful misrepresentation.
    (e) Records required to be kept under Sec. 220.030(a) shall be made 
available for inspection by any authorized agent of DOI at any time 
during normal business hours upon the request of the Director or other 
authorized official.



Sec. 220.034  Redetermination and appeals.

    (a) If, as a result of an inspection of records or an audit under 
Sec. 220.033, the Director determines that there is an error in the NPSL 
capital account or an error in calculating the net profit share payment, 
whether in favor of the government or the lessee, the Director shall 
redetermine the net profit share base and recalculate the net profit 
share payment due the United States and notify the lessee of the 
recalculation.
    (b) The lessee shall pay any additional amount of net profit share 
payment owed plus interest, compounded monthly, from the date that the 
payment was due until the date it is actually paid. Interest shall be 
calculated at the prevailing rate or rates as published in the Bulletin 
to the Department of the Treasury Fiscal Requirements Manual, in effect 
for the period or periods over which the payment is owed.
    (c) If the recalculated profit share payment is less than the amount 
paid the United States, the lessee shall apply such overpayment to the 
next profit share payment.
    (d) Within 30 days after receiving notice of the recalculation as 
provided in paragraph (a) of this section, the lessee may appeal the 
decision of the Director in accordance with the appeals provision of 30 
CFR part 290.



PART 228--COOPERATIVE ACTIVITIES WITH STATES AND INDIAN TRIBES--Table of Contents




                      Subpart A--General Provisions

Sec.
228.1  Purpose.
228.2  Policy.
228.4  Authority.
228.5  Delegation of authority.
228.6  Definitions.
228.10  Information collection.

               Subpart B--Oil and Gas, General [Reserved]

                     Subpart C--Oil and Gas, Onshore

228.100  Entering into an agreement.
228.101  Terms of agreement.
228.102  Establishment of standards.
228.103  Maintenance of records.
228.104  Availability of information.
228.105  Funding of cooperative agreements.
228.107  Eligible cost of activities.
228.108  Deduction of civil penalties accruing to the State or tribe 
          from the Federal share of a cooperative agreement.

    Authority: Section 202, Pub. L. 97-451, 96 Stat. 2457 (30 U.S.C. 
1732).

    Source: 49 FR 37348, Sept. 21, 1984, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 228.1  Purpose.

    It is the purpose of cooperative agreements to effectively utilize 
the capabilities of the States and Indian

[[Page 183]]

tribes in developing and maintaining an efficient and effective Federal 
royalty management system as indicated at 30 U.S.C. 1701.



Sec. 228.2  Policy.

    It shall be the policy of DOI to enter into cooperative agreements 
with States and Indian tribes to carry out audits and related 
investigations and enforcement actions whenever a State or tribe 
initiates a request to enter into an agreement and a finding is made 
that a State or tribe has the ability to carry out cooperative 
activities in a timely and efficient manner.



Sec. 228.4  Authority.

    The Secretary of the Interior is authorized to enter into 
cooperative agreements with States and Indian tribes (30 U.S.C. 1732) to 
share oil or gas royalty management information, and to carry out 
auditing and related investigation or enforcement activities in 
cooperation with the Secretary.



Sec. 228.5  Delegation of authority.

    (a) Authority to enter into cooperative agreements to carry out 
audit and related investigation and enforcement activities with State 
and tribal governments has been delegated to the Director of the 
Minerals Management Service (MMS).
    (b) Authority to enter into cooperative agreements with State and 
tribal governments to carry out inspection and related investigation and 
enforcement activities has been delegated to the Director of the Bureau 
of Land Management (BLM) and is not covered by this part.
    (c) The entry into a cooperative agreement with either MMS or BLM 
will not affect the ability of a State or Indian tribe to choose to 
enter into such an agreement with the other agency. A State may enter 
into a delegation agreement (30 U.S.C. 1735) with MMS to perform certain 
functions without affecting its ability to enter into a cooperative 
agreement with either MMS or BLM, or both, to cooperate in the 
performance of those functions which are not delegated in this part.



Sec. 228.6  Definitions.

    For the purposes of this part, terms shall have the same meaning as 
in 30 U.S.C. 1702. In addition, the following definition shall apply:
    Audit means an examination of the financial accounting and lease 
related records of the lessee and other interest holders, who by lease 
or contract pay royalties or are obligated to pay royalties, rents, 
bonuses or other payments on Federal or Indian leases. An examination is 
to be conducted in accordance with generally accepted audit standards as 
adopted by the American Institute of Certified Public Accountants. 
Activities to be examined which are considered to be an audit function 
include reconciliation of lease accounts under the Royalty Accounting 
System; records of lease activities related to Federal leases located 
within the boundaries of the State entering into a cooperative 
agreement; records of lease activities related to leases located on 
Indian lands, and the review and resolution of exceptions processed by 
the Auditing and Financial System and the Production Accounting and 
Auditing System, the official accounting systems for royalty reporters 
and payors maintained by the MMS.



Sec. 228.10  Information collection.

    (a) The information collection requirements contained in this part 
have been approved by OMB under 44 U.S.C. 3501 et seq. and assigned OMB 
Clearance Number 1010-0087. The information collected will be used to 
prepare a cooperative agreement with a State or Indian tribe wishing to 
perform royalty audits. The information should be submitted voluntarily 
in order to enter into a cooperative agreement authorized by 30 U.S.C. 
1732.
    (b) Public reporting burden is estimated to average 136 hours for 
the preparation of the original request for consideration and 
application to enter into a cooperative agreement. Subsequent requests 
for renewal of the agreement may require about 40 hours for the 
preparation of an annual budget and work plan, and an estimated 8 hours 
per quarter for preparation of a reimbursement voucher and an audit 
progress report. Send comments regarding this burden estimate or any

[[Page 184]]

other aspect of this collection of information, including suggestions 
for reducing burden, to the Information Collection Clearance Officer, 
Minerals Management Service, 381 Elden Street, Herndon, Virginia 22070; 
and to the Office of Information and Regulatory Affairs, Office of 
Management and Budget, Paperwork Reduction Project 1010-0087, 
Washington, DC 20503.

[57 FR 41868, Sept. 14, 1992, as amended at 58 FR 64903, Dec. 10, 1993]



               Subpart B--Oil and Gas, General [Reserved]



                     Subpart C--Oil and Gas, Onshore



Sec. 228.100  Entering into an agreement.

    (a) A State or Indian tribe may request the Department to enter into 
a cooperative agreement by sending a letter from the governor, tribal 
chairman, or other appropriate official with delegation authority, to 
the Director of MMS.
    (b) The request for an agreement shall be in a format prescribed by 
MMS and should include at a minimum the following information:
    (1) Type of eligible activities to be undertaken.
    (2) Proposed term of the agreement.
    (3) Evidence that the State or Indian tribe meets, or can meet by 
the time the agreement is in effect, the standards established by the 
Secretary for the types of activities to be conducted under the terms of 
the agreement.
    (4) If the State is proposing to undertake activities on Indian 
lands located within the State, a resolution from the appropriate tribal 
council indicating their agreement to delegate to the State 
responsibilities under the terms of the cooperative agreement for 
activities to be conducted on tribal or allotted land.
    (c) The eligible activities to be conducted under the terms of a 
cooperative agreement may be funded or unfunded by the Department. See 
Sec. 228.105 of this subpart for funding of cooperative agreements.

[49 FR 37348, Sept. 21, 1984, as amended at 56 FR 10512, Mar. 13, 1991]



Sec. 228.101  Terms of agreement.

    (a) Agreements entered into under this part shall be valid for a 
period of 3 years and shall be renewable or additional consecutive 3-
year periods upon request of the State or Indian tribe which is a party 
to the agreement.
    (b) An agreement may be terminated at any time by mutual agreement 
and upon any terms and conditions as agreed upon by the parties.
    (c) A State or Indian tribe may unilaterally terminate an agreement 
by giving a 120-day written notice of intent to terminate.
    (d) The MMS may commence termination of an agreement by giving a 
120-day written notice of intent to terminate. MMS shall provide the 
State or Indian tribe with the reasons for the proposed termination in 
writing if the termination is proposed because of alleged deficiencies 
by the State or Indian tribe in carrying out the provisions of the 
agreement. The State or Indian tribe will be given 60 days to respond to 
the notice of deficiencies and to provide a plan for correction of those 
deficiencies. No final action on termination shall be taken until any 
submission of the State or Indian tribe provided within the above 
prescribed 60 days has been reviewed by MMS for content or merit.
    (e) Termination of a cooperative agreement shall not bar a later 
request by a State or Indian tribe to enter into a subsequent 
cooperative agreement.



Sec. 228.102  Establishment of standards.

    The MMS, after consultation with States and Indian tribes, shall 
establish standards for carrying out the activities under the provisions 
of this part. The standards will be incorporated into the agreement and 
shall be no more stringent than those applicable to similar activities 
of the MMS. The States and Indian tribes shall coordinate their planned 
auditing activities with MMS. Where an MMS audit team is permanently 
assigned to a lessee/payor, contact by State and Indian tribal auditors 
with the lessee/payor shall be through the MMS auditor in residence.

[[Page 185]]



Sec. 228.103  Maintenance of records.

    (a) The State or Indian tribe entering into a cooperative agreement 
under this part must retain all records, reports, working papers, and 
any backup materials for a period specified by MMS. All records and 
support materials must be available for inspection and review by 
appropriate personnel of the Department including the Office of the 
Inspector General.
    (b) The State or Indian tribe shall maintain all books and records 
as may be necessary to assure compliance with the provisions of chapter 
1, 48 CFR 31.107 and 48 CFR subpart 31.6 (Contracts with State, local, 
and federally recognized Indian tribal Governments).

[56 FR 10512, Mar. 13, 1991]



Sec. 228.104  Availability of information.

    (a) Under the provisions of this part, information necessary to 
carry out the activities authorized under the terms of a cooperative 
agreement will be provided by DOI to the States and Indian tribes 
entering into such agreements. The information will consist of data 
provided from all relevant sources on a lease level basis for leases 
located within the boundaries of the State or Indian tribe which has 
entered into the agreement. This information will include any records or 
data held by the lessee or other person that have not been submitted to 
MMS, but that affect Federal lease interests and could be required to be 
submitted under the lease terms or Federal regulations.
    (b) None of the provisions of this subpart should be construed as 
limiting information already being provided to Indian tribes and 
allottees regarding their lease interests.
    (c) Information will be provided by MMS on a monthly basis and will 
include data on royalties, rents, and bonuses collected on the lease, 
volumes produced, sales made, value of products disposed of as a sale 
and used as a basis for royalty calculation, and other information 
necessary to allow the State or tribe to carry out its responsibilities 
under the cooperative agreement.
    (d) Proprietary data that is made available to a State or tribe 
under provisions of 30 U.S.C. 1733 shall be subject to the constraints 
of 18 U.S.C. 1905. To receive proprietary data, the State or tribe 
must--
    (1) Demonstrate what audit, investigation, or litigation under 
provisions of 30 U.S.C. 1734 is planned for or underway for which this 
data is essential;
    (2) Demonstrate why this particular data is necessary; and
    (3) Agree to safeguard proprietary data as provided.



Sec. 228.105  Funding of cooperative agreements.

    (a)(1) The Department may, under the terms of the cooperative 
agreement, reimburse the State or Indian tribe up to 100 percent of the 
costs of eligible activities. Eligible activities will be agreed upon 
annually upon the submission and approval of a workplan and funding 
requirement.
    (2) A cooperative agreement may be entered into with a State or 
Indian tribe, upon request, without a requirement for reimbursement of 
costs by the Department.
    (b) All cooperative agreements under this part are subject to annual 
funding and the availability of appropriations specifically designated 
for the purpose of this part.
    (c) The State or Indian tribe shall submit a voucher for 
reimbursement of eligible costs incurred within 30 days of the end of 
each calendar quarter. The State or Indian tribe must provide the 
Department a summary of costs incurred, for which the State or Indian 
tribe is seeking reimbursement, with the voucher.

[49 FR 37348, Sept. 21, 1984, as amended at 56 FR 10512, Mar. 13, 1991]



Sec. 228.107  Eligible cost of activities.

    (a) If a cooperative agreement provides for Federal funding, only 
costs directly associated with eligible activities undertaken by the 
State or Indian tribe under the terms of a cooperative agreement will be 
eligible for reimbursement. Costs of services or activities which cannot 
be directly related to the support of activities specified in the 
agreement will not be eligible for Federal funding or for inclusion in 
the State's share or in the Indian tribe's share of funding that may be 
established in the agreement.

[[Page 186]]

    (b) Eligible costs are the cost of salaries and benefits associated 
with technical, support, and clerical personnel engaged in eligible 
activities; direct cost of travel, rentals, and other normal 
administrative activities in direct support of the project or projects; 
basic and specialized training for State and tribal participants; and 
cost of any contractual services which can be shown to be in direct 
support of the activities covered by the agreement. Each cooperative 
agreement shall contain detailed schedules identifying those activities 
and costs which qualify for funding and the procedures, timing, and 
mechanics for implementing Federal funding.

[49 FR 37348, Sept. 21, 1984, as amended at 56 FR 10512, Mar. 13, 1991]



Sec. 228.108  Deduction of civil penalties accruing to the State or tribe from the Federal share of a cooperative agreement.

    As provided at 30 U.S.C. 1736, 50 percent of any civil penalty 
collected as a result of activities under a cooperative agreement will 
be shared with the State or Indian tribe performing the cooperative 
agreement; however, the amount of the civil penalty shared will be 
deducted from any Federal funding owed under that cooperative agreement. 
MMS shall maintain records of civil penalties collected and distributed 
to the States and tribes involved in cooperative agreements. Each 
quarterly payment of the Federal share of a cooperative agreement will 
be reduced by the amount of the civil penalties paid to the State or 
tribe during the prior quarter.



PART 229--DELEGATION TO STATES--Table of Contents




                      Subpart A--General Provisions

Sec.
229.1  Purpose.
229.2  Policy.
229.4  Authority.
229.6  Definitions.
229.10  Information collection requirements.

               Subpart B--Oil and Gas, General [Reserved]

                     Subpart C--Oil and Gas, Onshore

                      Administration of Delegations

229.100  Authorities and responsibilities subject to delegation.
229.101  Petition for delegation.
229.102  Fact-finding and hearings.
229.103  Duration of delegations; termination of delegations.
229.104  Terms of delegation of authority.
229.105  Evidence of Indian agreement to delegation.
229.106  Withdrawal of Indian lands from delegated authority.
229.107  Disbursement of revenues.
229.108  Deduction of civil penalties accruing to the State or tribe 
          under the delegation of authority.
229.109  Reimbursement for costs incurred by a State under the 
          delegation of authority.
229.110  Examination of the State activities under delegation.
229.111  Materials furnished to States necessary to perform delegation.

                         Delegation Requirements

229.120  Obtaining regulatory and policy guidance.
229.121  Recordkeeping requirements.
229.122  Coordination of audit activities.
229.123  Standards for audit activities.
229.124  Documentation standards.
229.125  Preparation and issuance of enforcement documents.
229.126  Appeals.
229.127  Reports from States.

    Authority: Section 205, Pub. L. 97-451, 96 Stat. 2459 (30 U.S.C. 
1735).



                      Subpart A--General Provisions

    Source: 49 FR 37350, Sept. 21, 1984, unless otherwise noted.



Sec. 229.1  Purpose.

    The purpose of this part is to promote the effective utilization of 
the capabilities of the States in developing and maintaining an 
efficient and effective Federal royalty management system.



Sec. 229.2  Policy.

    It shall be the policy of the Department of the Interior (DOI) to 
honor any properly made petition from the Chief Executive or other 
appopriate official

[[Page 187]]

of a State seeking delegation of authority under the provisions of 30 
U.S.C. 1735 and to make a delegation to conduct audits and related 
investigations when the Secretary finds that the provisions of 30 U.S.C. 
1735 have been complied with or can be complied with by a State seeking 
the delegation.



Sec. 229.4  Authority.

    The Secretary of the DOI is authorized under provisons of 30 U.S.C. 
1735 to delegate authority to States to conduct audits and related 
investigations with respect to all Federal lands within a State, and to 
those Indian lands to which a State has received permission from the 
respective Indian tribe(s) or allottee(s) to carry out audit activities 
under a delegation from the Secretary.



Sec. 229.6  Definitions.

    The definitions contained in 30 U.S.C. 1702 and in part 228 of this 
chapter apply to the activities carried out under the provisions of this 
part.



Sec. 229.10  Information collection requirements.

    The information collection requirements contained in this part do 
not require approval by the Office of Management and Budget under 44 
U.S.C. 3501 et seq., because there are fewer than 10 respondents 
annually.



               Subpart B--Oil and Gas, General [Reserved]



                     Subpart C--Oil and Gas, Onshore

    Authority: The Federal Oil and Gas Royalty Management Act of 1982 
(30 U.S.C. 1701 et seq.).

                      Administration of Delegations



Sec. 229.100  Authorities and responsibilities subject to delegation.

    (a) All or part of the following authorities and responsibilities of 
the Secretary under the Act may be delegated to a State authority:
    (1) Conduct of audits related to oil and gas royalty payments made 
to the MMS which are attributable to leased Federal or Indian lands 
within the State. Delegations with respect to any Indian lands require 
the written permission, subject to the review of the MMS, of the 
affected Indian tribe or allottee.
    (2) Conduct of investigations related to oil and gas royalty 
payments made to the MMS which are attributable to leased Federal lands 
or Indian lands within the State. Delegation with respect to any Indian 
lands require the written permission, subject to the review of the MMS, 
of the affected Indian tribe or allottee. No investigation will be 
initiated without the specific approval of the MMS or the Secretary's 
designee and in accordance with the Departmental Manual.
    (b) The following authorities and responsibilities are specifically 
reserved to the MMS and are not delegable under these regulations:
    (1) Enforcement actions to assess and collect additional royalties 
identified as a consequence of audits, inspections, and investigations. 
These include all actions related to resolution of royalty obligations 
so identified, and the establishment and maintenance of payment 
performance bonds which may be required during the resolution process.
    (2) Enforcement actions to collect civil penalties and interest 
charges related to findings of audits, inspections, and investigations.
    (3) Administration of all appeals and all actions of the Department 
related to administrative and judicial litigation.
    (4) Issuance of subpoenas.
    (c) The provisions of this section do not limit the authority 
provided to the States by section 204 of the Act.

[49 FR 40026, Oct. 12, 1984]



Sec. 229.101  Petition for delegation.

    (a) The governor or other authorized official of any State which 
contains Federal oil and gas leases, or Indian oil and gas leases where 
the Indian tribe and allottees have given the State an affirmative 
indication of their desire for the State to undertake certain royalty 
management-related activities on their lands, may petition the Secretary 
to assume responsibilities to conduct audits and related investigations 
of royalty related matters affecting Federal or Indian oil and gas 
leases within the State.

[[Page 188]]

    (b) A State may enter into a delegation of authority under this part 
without affecting a State's ability to enter into a cooperative 
agreement under Part 228 of this chapter.
    (c) The Secretary shall carry out all factfinding and hearings he 
may decide are necessary in order to approve or disapprove the petition.
    (d) In the event that the Secretary denies the petition, the 
Secretary must provide the State with the specific reasons for denial of 
the petition. The State will then have 60 days to either contest or 
correct specific deficiencies and to reapply for a delegation of 
authority.

[49 FR 37350, Sept. 21, 1984. Redesignated and amended at 49 FR 40025, 
Oct. 12, 1984]



Sec. 229.102  Fact-finding and hearings.

    (a) Upon receipt of a petition for delegation from a State, the 
Secretary shall appoint a representative to conduct a hearing or 
hearings to carry out factfinding and determine the ability of the 
petitioning State to carry out the delegated responsibilities requested 
in accordance with the provisions of this part.
    (b) The Secretary's representative, after proper notice in the 
Federal Register and other appropriate media within the State, shall 
hold one or more public hearings to determine whether:
    (1) The State has an acceptable plan for carrying out delegated 
responsibilities and if it is likely that the State will provide 
adequate resources to achieve the purposes of this part (30 U.S.C. 
1735);
    (2) The State has the ability to put in place a process within 60 
days of the grant of delegation which will assure the Secretary that the 
functions to be delegated to the State can be effectively carried out;
    (3) The State has demonstrated that it will effectively and 
faithfully administer the rules and regulations of the Secretary in 
accordance with the requirements at 30 U.S.C. 1735;
    (4) The State's plan to carry out the delegated authority will be in 
accordance with the MMS standards; and
    (5) The State's plan to carry out the delegated authority will be 
coordinated with MMS and the Office of Inspector General audit efforts 
to eliminate added burden on any lessee or group of lessees operating 
Federal or Indian oil and gas leases within the State.
    (c) A State petitioning for a delegation of authority shall be given 
the opportunity to present testimony at a public hearing.

[49 FR 37350, Sept. 21, 1984. Redesignated and amended at 49 FR 40025, 
Oct. 12, 1984]



Sec. 229.103  Duration of delegations; termination of delegations.

    (a) Delegations of authority shall be valid for a period of 3 years 
and may be renewable for an additional consecutive 3-year period upon 
request of the State and after the appropriate factfinding required in 
Sec. 229.101. Delegations are subject to annual funding and the 
availability of appropriations specifically designated for the purpose 
of this part.
    (b) A delegation of authority may be terminated at any time and upon 
any terms and conditions as mutually agreed upon by the parties.
    (c) A State may terminate a delegation of authority by giving a 120-
day written notice of intent to terminate.
    (d) The Department may terminate a delegation of authority when it 
is determined, after opportunity for a hearing, that the State has 
failed to substantially comply with the provisions of the delegation of 
authority.
    (e) No action to initiate formal hearing proceedings for termination 
shall be taken until the Department has notified the State in writing of 
alleged deficiencies and allowed the State 120 days to correct the 
deficiencies.
    (f) Termination of a delegation shall not bar a subsequent request 
by a State to regain a delegation of authority.

[49 FR 37351, Sept. 21, 1984, as amended at 49 FR 40025, Oct. 12, 1984]



Sec. 229.104  Terms of delegation of authority.

    Each delegation of authority under this part shall be in writing, 
shall incorporate all the requirements of this part, and shall 
specifically include:
    (a) Terms obligating the State to conduct audit and investigative 
activities for a specific period of time;
    (b) Terms describing the authorities and responsibilities reserved 
by the

[[Page 189]]

MMS, including, but not limited to, those specified under Sec. 229.100;
    (c) Terms requiring the State to provide annual audit workplans to 
include the lease universe by company, or by individual lease accounts, 
a description of the audit work product(s) to be delivered, and the 
State resources (staff and otherwise) to be committed to the delegation;
    (d) Terms requiring the State to notify the MMS of any changed 
circumstances which would affect the State's ability to carry out the 
terms of the delegation;
    (e) Terms requiring coordination of delegated activities among the 
State, the MMS, and the land management agencies responsible for 
management of the leases included in the audit universe;
    (f) Terms requiring the State to maintain and make available to the 
MMS all audit workpapers, documents, and information gained or developed 
as a consequence of activities conducted under the delegation;
    (g) Terms obligating the State to adhere to all Federal laws, rules 
and regulations, and Secretarial determinations and orders relating to 
the calculation, reporting, and payment of oil and gas royalties, in all 
activities performed under the delegation.

[49 FR 40026, Oct. 12, 1984]



Sec. 229.105  Evidence of Indian agreement to delegation.

    In the case of a State seeking a delegation of authority for Indian 
lands as well as Federal lands, the State petition to the Secretary must 
be supported by an appropriate resolution or resolutions of tribal 
councils joining the State in petitioning for delegation and evidence of 
the agreement of individual Indian allottees whose lands would be 
involved in a delegation. Such evidence shall specifically speak to 
having the State assume delegated responsibility for specific functions 
related to royalty management activities.

[49 FR 37351, Sept. 21, 1984. Redesignated at 49 FR 40025, Oct. 12, 
1984]



Sec. 229.106  Withdrawal of Indian lands from delegated authority.

    If at any time an Indian tribe or an individual Indian allottee 
determines that it wishes to withdraw from the State delegation of 
authority in relation to its lands, it may do so by sending a petition 
of withdrawal to the State. Once the petition has been received, the 
State shall within 30 days cease all activities being carried out under 
the delegation of authority on the lands covered by the petition for the 
tribe or allottee.

[49 FR 37351, Sept. 21, 1984. Redesignated at 49 FR 40025, Oct. 12, 
1984]



Sec. 229.107  Disbursement of revenues.

    (a) The additional royalties and late payment charges resulting from 
State audit work done under a delegation of authority shall be collected 
by MMS. The State's share of any amounts so collected shall be paid to 
the State in accordance with the provisions of 30 U.S.C. 191 and part 
219 of this chapter.
    (b) Amounts collected for Indian leases shall be transferred to the 
appropriate Indian accounts (designated Treasury accounts) managed by 
the Bureau of Indian Affairs at the earliest practicable date after such 
funds are received, but in no case later than the last business day of 
the month in which such funds are received.
    (c) MMS shall provide to the State on a monthly basis, an accounting 
of collections resulting from audit work and enforcement actions 
resulting from a delegation of authority. Such accounting will identify 
collections broken down by royalties, penalties and interest paid.

[49 FR 40026, Oct. 12, 1984]



Sec. 229.108  Deduction of civil penalties accruing to the State or tribe under the delegation of authority.

    Fifty percent of any civil penalty resulting from activities under a 
delegation of authority shall be shared with the delegated State. 
However, the amount of the civil penalty shared will be deducted from 
any Federal funding owed under a delegation of authority under the 
provisions of 30 U.S.C. 1735. MMS shall maintain records of civil 
penalties collected and distributed to

[[Page 190]]

the States involved in 30 U.S.C. 1735 delegations. Each quarterly 
payment will be reduced by the amount of the civil penalties paid to the 
delegated State or tribe during the prior quarter.

[49 FR 37351, Sept. 21, 1984. Redesignated at 49 FR 40025, Oct. 12, 
1984]



Sec. 229.109  Reimbursement for costs incurred by a State under the delegation of authority.

    (a) The Department of the Interior (DOI) shall reimburse the State 
for 100 percent of the direct cost associated with the activities 
undertaken under the delegation of authority. The State shall maintain 
books and records in accordance with the standards established by the 
DOI and will provide the DOI, on a quarterly basis, a summary of costs 
incurred for which the State is seeking reimbursement. Only costs as 
defined under the provisions of 30 U.S.C. 1735 are eligible for 
reimbursement.
    (b) The State shall submit a voucher for reimbursement of costs 
incurred within 30 days of the end of each calendar quarter.

[49 FR 37351, Sept. 21, 1984]



Sec. 229.110  Examination of the State activities under delegation.

    (a) The Department will carry out an annual examination of the 
State's delegated activities undertaken under the delegation of 
authority.
    (b) The examination required by this section will consist of a 
management review and a fiscal examination and evaluation to determine--
    (1) That activities being carried out by the State under the 
delegation of authority meet the standards established by the Department 
and in particular the provisions of 30 U.S.C. 1735; and
    (2) That costs incurred by the State under the delegation of 
authority are eligible for reimbursement by the Department.

[49 FR 37351, Sept. 21, 1984. Redesignated at 49 FR 40025, Oct. 12, 
1984]



Sec. 229.111  Materials furnished to States necessary to perform delegation.

    The MMS shall provide to the State all reports, files, and 
supporting materials within its possession necessary to allow the State 
to effectively carry out the terms of the delegation specified in 
Sec. 229.104.

[49 FR 40026, Oct. 12, 1984]

                         Delegation Requirements

    Source: Sections 229.120 through 229.126 appear at 49 FR 40026, Oct. 
12, 1984, unless otherwise noted.



Sec. 229.120  Obtaining regulatory and policy guidance.

    All activities performed by a State under a delegation must be in 
full accord with all Federal laws, rules and regulations, and 
Secretarial and agency determinations and orders relating to the 
calculation, reporting, and payment of oil and gas royalties. In those 
cases when guidance or interpretations are necessary, the State will 
direct written requests for such guidance or interpretation to the 
appropriate MMS officials. All policy and procedural guidance or 
interpretation provided by the MMS shall be in writing and shall be 
binding on the State.



Sec. 229.121  Recordkeeping requirements.

    (a) The State shall maintain in a safe and secure manner all 
records, workpapers, reports, and correspondence gained or developed as 
a consequence of audit or investigative activities conducted under the 
delegation. All such records shall be made available for review and 
inspection upon request by representatives of the Secretary and the 
Department's Office of Inspector General (OIG).
    (b) The State must maintain in a confidential manner all data 
obtained from DOI sources or from payor or company sources under the 
delegation which have been deemed ``confidential or proprietary'' by DOI 
or a company or payor. In this regard, the State regulatory authority 
shall be bound by provisions of 30 U.S.C. 1733. MMS shall provide to the 
State guidelines for determining confidential and proprietary material.
    (c) All records subject to the requirements of paragraph (a) must be 
maintained for a 6-year period measured from the end of the calendar 
year in which the records were created. All dispositions or records must 
be with the

[[Page 191]]

written approval of the MMS. Upon termination of a delegation, the State 
shall, within 90 days from the date of termination, assemble all records 
specified in subsection (a), complete all working paper files in 
accordance with Sec. 229.124, and transfer such records to the MMS.
    (d) The State shall maintain complete cost records for the 
delegation in accordance with generally accepted accounting principles. 
Such records shall be in sufficient detail to demonstrate the total 
actual costs associated with the project and to permit a determination 
by MMS whether delegation funds were used for their intended purpose. 
All such records shall be made available for review and inspection upon 
request by representatives of the Secretary and the Department's Office 
of Inspector General (OGIG).



Sec. 229.122  Coordination of audit activities.

    (a) Each State with a delegation of authority shall submit annually 
to the MMS an audit workplan specifically identifying leases, resources, 
companies, and payors scheduled for audit. This workplan must be 
submitted 120 days prior to the beginning of each fiscal year. A State 
may request changes to its workplan (including the companies and leases 
to be audited) at the end of each quarter of each fiscal year. All 
requested changes are subject to approval by the MMS and must be 
submitted in writing.
    (b) When a State plans to audit leases of a lessee or royalty payor 
for which there is an MMS or OIG resident audit team, all audit 
activities must be coordinated through the MMS or OIG resident 
supervisor. Such activities include, but are not limited to, issuance of 
engagement letters, arranging for entrance conferences, submission of 
data requests, scheduling of audit activities including site visits, 
submission of issue letters, and closeout conferences.
    (c) The State shall consult with the MMS and/or OIG regarding 
resolution of any coordination problems encountered during the conduct 
of delegation activities.



Sec. 229.123  Standards for audit activities.

    (a) All audit activities performed under a delegation of authority 
must be in accordance with the ``Standards for Audit of Governmental 
Organizations, Programs, Activities, and Functions'' as issued by the 
Comptroller General of the United States.
    (b) The following audit standards also shall apply to all audit work 
performed under a delegation of authority.
    (1) General standards--(i) Qualifications. The auditors assigned to 
perform the audit must collectively possess adequate professional 
proficiency for the tasks required, including a knowledge of accounting, 
auditing, agency regulations, and industry operations.
    (ii) Independence. In all matters relating to the audit work, the 
audit organization and the individual auditors must be free from 
personal or external impairments to independence and shall maintain an 
independent attitude and appearance.
    (iii) Due professional care. Due professional care is to be used in 
conducting the audit and in preparing related reports.
    (iv) Quality control. The State governments must institute quality 
control review procedures to ensure that all audits are performed in 
conformity with the standards established herein.
    (2) Examination and evaluation standards--Standards and requirements 
for examination and evaluation. Auditors should be alert to situations 
or transactions that could be indicative of fraud, abuse, or illegal 
acts with respect to the program. If such evidence exists, auditors 
should forward this evidence to MMS. The MMS will contact the 
appropriate Federal law enforcement agencies. The scope of examinations 
are to be governed by the principle of a justifiable relationship 
between cost and benefit as determined by the auditor or audit 
supervisor. Audit procedures should reflect the most efficient method of 
obtaining the requisite degree of satisfaction. The auditor should 
determine, to the extent possible, the effect on royalty reporting of 
the non-arms'-length nature of related party transactions, such as 
transfers of oil to refinery units affiliated with the producer. A 
review

[[Page 192]]

should be made of compliance with the appropriate laws and regulations 
applicable to program operations. MMS shall issue guidelines as to the 
definition and nature of arms'-length and non-arms'-length transactions 
for use in carrying out delegated audit activities.
    (3) Standards of reporting. (i) Written audit reports are to be 
submitted to the appropriate MMS officials at the end of each field 
examination.
    (ii) A statement in the auditors' report that the examination was 
made in accordance with the generally accepted program audit standards 
(including the applicable General Accounting Office (GAO) standards) for 
royalty compliance audits should be in the appropriate language to 
indicate that the audit was made in accordance with this statement of 
standards.
    (iii) The auditor's report should contain a statement of positive 
assurance on those items tested and negative assurance on those items 
not tested. It should also include all instances of noncompliance and 
instances or indications of fraud, abuse, or illegal acts found during 
or in connection with the audit.
    (iv) The auditor's report should contain any other material 
deficiency identified during the audit not covered in paragraph 
(b)(3)(iii) of this section.
    (v) When factors external to the program and to the auditor restrict 
the audit or interfere with the auditor's ability to form objective 
opinions and conclusions (such as denial of access to information by a 
company), the auditor is to notify the MMS. If the limitation is not 
removed, a description of the matter must be included in the auditor's 
report. MMS will take all legally enforceable steps necessary to seek 
information necessary to complete the audit.
    (vi) If certain information is prohibited from general disclosure, 
the auditor's report should state the nature of the information omitted 
and the requirement that makes the omission necessary.
    (vii) Written audit reports are to be prepared in the format 
prescribed by the MMS.
    (viii) In instances where the extent of the audit findings or the 
amounts involved do not warrant it, a formal audit report need not be 
issued. In lieu of an audit report, a memorandum of audit findings will 
be prepared and placed on the case file.

[49 FR 40026, Oct. 12, 1984, as amended at 58 FR 64903, Dec. 10, 1993]



Sec. 229.124  Documentation standards.

    Every audit performed by a State under a delegation of authority 
must meet certain documentation standards. In particular, detailed 
workpapers must be developed and maintained.
    (a) Workpapers are defined to include all records obtained or 
created in performing an audit.
    (b) Each audit performed varies in scope and detail. As a result, 
the audit team must determine the best presentation of the workpapers 
for a particular audit. The following general standards of workpaper 
preparation are consistent with the goal of achieving proper 
documentation while maintaining sufficient flexibility.
    (1) All relevant information obtained orally must be promptly 
recorded in writing and incorporated in the workpapers.
    (2) Workpapers must be complete and accurate in order to provide 
support for findings and conclusions.
    (3) Workpapers should be clear and understandable without the need 
for supplementary oral explanations. The information they contain must 
be clear, complete, and concise, so that anyone using the workpapers 
will be able to readily determine their purpose, the nature and scope of 
the work done, and the conclusions drawn.
    (4) Workpapers must be legible and as neat as practicable. They must 
meet standards which allow their use as evidence in judicial and 
administrative proceedings.
    (5) The information contained in workpapers should be restricted to 
matters which are materially important and relevant to the objectives 
established for the assignment.
    (6) Workpapers must be in sufficient detail to permit a subsequent 
independent execution of each audit procedure, assuming the target 
company retains its accounting documentation.

[[Page 193]]



Sec. 229.125  Preparation and issuance of enforcement documents.

    (a) Determinations of additional royalties due resulting from audit 
activities conducted under a delegation of authority must be formally 
communicated by the State, to the companies or other payors by an issue 
letter prior to any enforcement action. The issue letter will serve to 
ensure that all audit findings are accurate and complete by obtaining 
advance comments from officials of the companies or payors audited. 
Issue letters must be prepared in a format specified by the MMS, and 
transmitted to the company or payor. The company or payor shall be given 
30 days from receipt of the letter to respond to the State on the 
findings contained in the letter.
    (b) After evaluating the company or payor's response to the issue 
letter, the State shall draft a demand letter which will be submitted 
with supporting workpaper files to the MMS for appropriate enforcement 
action. Any sustantive revisions to the demand letter will be discussed 
with the State prior to issuance of the letter. Copies of all 
enforcement action documents shall be provided to the State by MMS upon 
their issuance to the company or payor.



Sec. 229.126  Appeals.

    (a) Appeals made pursuant to the rules and procedures at 30 CFR 
parts 243 and 290 related to demand letters issued by officers of the 
MMS for additional royalties identified under a delegation of authority 
shall be filed with the MMS for processing. The State regulatory 
authority shall, upon the request of the MMS, provide competent and 
knowledgeable staff for testimony, as well as any required documentation 
and analyses, in support of the lessor's position during the appeal 
process.
    (b) An affected State, upon the request of the MMS, shall provide 
expert witnesses from their audit staff for testimony as well as 
required documentation and analyses to support the Department's position 
during the litigation of court cases arising from denied appeals. The 
cost of providing expert witnesses including travel and per diem is 
reimbursable under the provisions of a delegation of authority, at the 
Federal Government's existing per diem rates.



Sec. 229.127  Reports from States.

    The State, acting under the authority of the Secretarial delegation, 
shall submit quarterly reports which will summarize activities carried 
out by the State during the preceding quarter of the year under the 
provisions of the delegation. The report shall include:
    (a) A statistical summary of the activities carried out, e.g., 
number of audits performed, accounts reconciled, and other actions 
taken;
    (b) A summary of costs incurred during the previous quarter for 
which the State is seeking reimbursement; and
    (c) A schedule of changes which the State proposes to make from its 
approved plan.

[49 FR 37351, Sept. 21, 1984. Redesignated at 49 FR 40025, Oct. 12, 
1984]



PART 230--RECOUPMENTS AND REFUNDS--Table of Contents




                      Subpart A--General Provisions

Sec.
230.51  Cross-lease netting in calculation of overpayments under section 
          10 of the OCSLA.

[[Page 194]]

         Subpart B--Oil, Gas, and OCS Sulfur, General [Reserved]

              Subpart C--Federal and Indian Oil [Reserved]

              Subpart D--Federal and Indian Gas [Reserved]

              Subpart E--Solid Minerals, General [Reserved]

                       Subpart F--Coal [Reserved]

               Subpart G--Other Solid Minerals [Reserved]

               Subpart H--Geothermal Resources [Reserved]

                    Subpart I--OCS Sulfur [Reserved]

Subpart J--Refunds and Recoupments of Overpayments Under Federal Leases 
on the Outer Continental Shelf; Impementation of Section 10 of the Outer 
                       Continental Shelf Lands Act

230.451  Scope.
230.452  Definitions.
230.453  Request for refund or credit.
230.454  Interest on excess payments.
230.455  Authorization of refund or credit and subsequent audit.
230.456  Offsets of overpayments and underpayments on the same lease (or 
          unit) by the same person.
230.457  Offsets among different persons who reported and paid royalties 
          on a lease for the same prior sales month.
450.458  Unauthorized credit adjustments.
230.549  Stopping or tolling of the section 10(a) 2-year period.
230.460  Lease suspension.
230.461  Transactions not subject to section 10.

    Authority: 5 U.S.C. 301 et seq.; 25 U.S.C. 396 et seq.; 25 U.S.C. 
396a et seq.; 25 U.S.C. 2101 et seq.; 30 U.S.C. 181 et seq.; 30 U.S.C. 
351 et seq.; 30 U.S.C. 1001 et seq.; 30 U.S.C. 1701 et seq.; 31 U.S.C. 
3716; 31 U.S.C. 3720A; 31 U.S.C. 9701; 43 U.S.C. 1301 et seq.; 43 U.S.C. 
1331 et seq.; and 43 U.S.C. 1801 et seq.

    Source: 57 FR 62207, Dec. 30, 1992, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 230.51  Cross-lease netting in calculation of overpayments under section 10 of the OCSLA.

    (a) The amount of any refund or credit for any overpayment for any 
lease or leases governed by the Outer Continental Shelf Lands Act 
(OCSLA), as amended, for any production month shall not be reduced by 
offsetting against that overpayment any reported underpayment by the 
payor on any other lease or leases, except as provided in paragraph (b) 
of this section.
    (b) Royalties attributed to production from a lease or leases 
governed by the OCSLA, which should have been attributed to production 
from a different lease or leases governed by the OCSLA, may be offset 
without regard to the provisions of OCSLA section 10, 43 U.S.C. 1339, 
only if the payor submits a written request to Minerals Management 
Service (MMS), Fiscal Accounting Division, for its approval of the 
correction and provides adequate documentation to show that the 
following conditions exist and are met:
    (1) The error results from attributing and reporting an equal volume 
of production, produced from a lease or leases during a particular 
production month, to a different lease or leases from which that 
production was not produced for the same or another production month;
    (2) The payor is the same for the lease or leases to which the 
production was attributed and the lease or leases to which it should 
have been attributed;
    (3) The payor submits production reports, pipeline allocation 
reports, or other similar documentary evidence pertaining to the 
specific production involved which verifies the correct production 
information; and
    (4) In the case of leases which are within the zone defined and 
governed by section 8(g) of the OCSLA, as amended, 43 U.S.C. 1337(g), 
the leases are located off the coast of the same State.
    (c) If MMS approves a correction pursuant to paragraph (b) of this 
section, the payor is required to submit an adjusting royalty report 
(Form MMS-2014) pursuant to 30 CFR part 210 to correct its reporting to 
the Auditing and Financial System.
    (d) If MMS requires a repayment of principal royalties or assesses 
late-payment interest as a result of the payor having improperly offset 
any underpayment against an overpayment and,

[[Page 195]]

therefore, having failed to request a refund or credit as required by 
section 10 of the OCSLA, 43 U.S.C. 1339, and the payor asserts pursuant 
to 30 CFR part 290 that some or all of the royalties or interest 
assessed is not owed pursuant to the exception set forth in paragraph 
(b) of this section, the burden is on the payor to demonstrate that the 
exception applies in the specific circumstances of the case.
    (e) The exception set forth in paragraph (b) of this section shall 
not operate to relieve any payor of any liability imposed by statute or 
regulation for erroneous reporting.



         Subpart B--Oil, Gas, and OCS Sulfur, General [Reserved]



              Subpart C--Federal and Indian Oil [Reserved]



              Subpart D--Federal and Indian Gas [Reserved]



              Subpart E--Solid Minerals, General [Reserved]



                       Subpart F--Coal [Reserved]



               Subpart G--Other Solid Minerals [Reserved]



               Subpart H--Geothermal Resources [Reserved]



                    Subpart I--OCS Sulfur [Reserved]



Subpart J--Refunds and Recoupments of Overpayments Under Federal Leases 
  on the Outer Continental Shelf; Implementation of Section 10 of the 
                    Outer Continental Shelf Lands Act

    Source: 59 FR 38363, July 28, 1994, unless otherwise noted.



Sec. 230.451  Scope.

    This subpart establishes the procedures that lessees and other 
persons who make royalty and other payments on Federal oil and gas 
leases on the Outer Continental Shelf (OCS) must follow to recover 
certain excess payments made in connection with their leases in 
accordance with section 10 of the Outer Continental Shelf Lands Act 
(section 10), 43 U.S.C. 1339. The requirements of this subpart apply to 
both requests for refund from the Treasury of excess payments and 
requests to recover excess payments by recouping the amount through a 
credit adjustment. This subpart applies only to Federal leases on the 
OCS.



Sec. 230.452  Definitions.

    Terms used in this subpart shall have the same meaning as in 30 
U.S.C. 1702.

In addition, the following definitions apply to this subpart:
    Credit or crediting means reduction of a current or future royalty 
or other payment made in connection with a lease as a result of 
reporting a credit adjustment.
    Credit Adjustment means any adjustment reported on a Report of Sales 
and Royalty Remittance (Form MMS-2014) or any other royalty report form 
which reduces any royalty or other payment made in connection with a 
lease which was reported and paid in any previous period.
    Offset means to net or cancel previous overpayments against previous 
underpayments on the same OCS lease or across lease boundaries if all 
the individual leases are part of an approved unit agreement.
    Overpayment means any payment made in excess of the amount that the 
lessee was lawfully required to pay.
    Payment means money MMS receives in satisfaction of a lessee's 
royalty, rental, bonus, net profit share, or late payment interest 
obligation as established by statute, regulation, or the terms of a 
lease.
    Recoup or recoupment means to recover a previous overpayment through 
a credit against a current or future royalty or other payment or 
liability under an OCS lease. A recoupment occurs whenever a payor 
reports a credit adjustment on a Form MMS-2014 or other royalty report 
form resulting in a net negative dollar value for the transaction and 
the credit is taken against the royalty or other payment

[[Page 196]]

or liability shown in the balance of the report.
    Refund means a repayment by the United States Treasury to a person 
of any overpayment.
    Unit means an area of 2 or more leases subject to an agreement for 
the consolidated development and recovery of oil and gas contained on 
the leases which are part of the agreement approved by MMS.



Sec. 230.453  Request for refund or credit.

    (a) Except as otherwise provided in this subpart, no person may 
recover an excess payment it has made in connection with an OCS lease 
unless:
    (1) That person has made a request for refund or credit in 
accordance with the provisions of this subpart;
    (2) MMS has transmitted a report on the request for refund or credit 
to the President of the Senate and the Speaker of the House of 
Representatives and 30 days have expired since the submission in 
accordance with section 10(b), 43 U.S.C. 1339(b); and
    (3) MMS notifies the person that its request for refund or credit is 
authorized and that the person may receive its refund for, or may report 
a credit adjustment to recoup, the excess payment.
    (b) A request for refund or credit must:
    (1) Be in writing;
    (2) Provide the person's MMS-established payor code;
    (3) Identify the leases and sales months with respect to which the 
excess payments occurred;
    (4) Identify the amount of the excess payment or, with specificity, 
describe a class of payments that are, or as a result of an 
administrative or judicial decision or other identified contingency, may 
become, excess payments;
    (5) Provide the reasons why a refund or credit is due;
    (6) Include a certification that, to the best of the person's 
knowledge or belief, the information provided in response to paragraphs 
(b)(2) through (b)(5) of this section is accurate and complete.
    (c) If MMS determines that a request for refund or credit is 
incomplete, the person who submitted the request will have 30 days, or 
such time as MMS may specify, following notice from MMS, to supplement 
the request for refund or credit.
    (d) A credit adjustment reported on a Form MMS-2014 does not 
constitute a request for refund or credit for purposes of this section, 
and does not constitute an incomplete request for refund or credit for 
purposes of paragraph (c) of this section.
    (e) A person who has filed a request for refund or credit pursuant 
to this section may amend that request to add an additional amount if:
    (1) The additional amount is for the same lease and sales month; and
    (2) The reason for the excess payment for the additional amount is 
the same as for the originally requested amount.
    (f) Except as otherwise provided in this subpart, no request for a 
refund or credit will be approved unless the request is received at MMS 
at the address provided below within 2 years of the date that MMS 
received the excess payment.
    (1) The request for refund or credit must be received at the 
following address:
    (i) By mail: Minerals Management Service, Section 10 Refund 
Requests, P.O. Box 173702, Denver, CO 80217-3702.
    (ii) By express delivery or courier: Minerals Management Service, 
Section 10 Refund Requests, Building 85, Denver Federal Center, Room A-
212, Denver, CO 80225.
    (2) If the last day of the 2-year period from the date MMS received 
the excess payment falls on a Saturday, Sunday, holiday or any other day 
that MMS is not open for business at the address specified in paragraph 
(f)(1) of this section, then the last day of the 2-year period will be 
the next regular business day. Requests received at the specified MMS 
address after 4 p.m. Mountain Time are considered received the following 
business day.



Sec. 230.454  Interest on excess payments.

    No person is entitled to interest on any excess payment made in 
connection with a lease that is refunded or recouped pursuant to this 
subpart.

[[Page 197]]



Sec. 230.455  Authorization of refund or credit and subsequent audit.

    MMS may grant a refund or authorize a credit based upon satisfactory 
evidence that the payment for which a refund or credit is requested was 
made, and upon a determination that the payment was excess. An approved 
request for refund or credit may be subject to later review or audit by 
MMS. If, based upon later review or audit, MMS determines that the 
refund or credit should not have been granted or authorized, the person 
who requested the refund or credit must repay the amount refunded or 
recouped plus interest determined pursuant to 30 U.S.C. 1721(a) and 30 
CFR 218.150 from the date the refund was made or the recoupment taken 
until the date it is repaid.



Sec. 230.456  Offsets of overpayments and underpayments on the same lease (or unit) by the same person.

    If a person makes an overpayment on any OCS lease or unit in a prior 
month, it may offset that overpayment against an underpayment that same 
person made in any prior month on that same lease or unit for the same 
or a different product without submitting a request for refund or 
credit. This offset is permitted only if the underpayment was not 
created as a result of a credit adjustment to recoup the amount of the 
overpayment or was not otherwise created intentionally to provide an 
underpayment against which to offset the overpayment. This offset also 
is subject to any limitations imposed by other applicable law or 
regulations.



Sec. 230.457  Offsets among different persons who reported and paid royalties on a lease for the same prior sales month.

    (a) This section applies to any reallocation of production for a 
prior sales month among different persons who reported and paid royalty 
for that month on a lease or unit, except for reallocations of 
production that result from the approval or amendment of a unit 
agreement subject to Sec. 230.461(b).
    (b) In the event of a reallocation of production as described in 
paragraph (a) of this section, the respective persons who reported and 
paid royalty may reconcile any resulting differences in royalty payment 
obligations between themselves without submitting revised royalty 
reports or requests for refund or credit to MMS under this subpart, 
except that:
    (1) Any person who paid any amount which remains as a net 
overpayment after such reconciliation must file a request for refund or 
credit in accordance with the requirements of this subpart to recover 
the excess payment;
    (2) Any person whose royalty obligation remains underpaid after such 
reconciliation must report the additional royalties due for the prior 
sales month on a Form MMS-2014 and pay interest on the underpayment from 
the last day of the month following the sales month until the date the 
additional royalties are paid; and
    (3) All persons involved in such reconciliation must retain all 
documents pertaining to the reallocation of production, calculation of 
royalties due, and the subsequent reconciliation among the persons 
involved together with other records pertaining to production from that 
lease during the prior sales month and the royalty due and paid thereon, 
and make such documents available for review and audit in the same 
manner as other records pertaining to the lease.
    (c) If persons who reported and paid royalty do not reconcile 
between themselves any differences in royalty payment obligations 
arising as a result of a reallocation as provided in paragraph (b) of 
this section, each person who pays royalties for the lease must report 
and pay any additional royalties due, or file a request for refund or 
credit in accordance with the requirements of this subpart to recover 
the excess payment, as applicable. Any person who reports additional 
royalties due for the prior sales month must pay interest pursuant to 30 
CFR 218.54 on the underpayment from the last day of the month following 
the sales month until the date the additional royalties are paid.



Sec. 230.458  Unauthorized credit adjustments.

    (a) If a person reports a credit adjustment on Form MMS-2014 that 
results in a credit before MMS approves the recoupment pursuant to 
Sec. 230.455, and if

[[Page 198]]

the credit adjustment does not qualify as one of the transactions not 
subject to section 10 as provided in Sec. 230.461, then that person has 
taken an unauthorized credit adjustment.
    (1) If the unauthorized credit adjustment recouped a payment that 
MMS received more than 2 years before the date MMS received the Form 
MMS-2014 which includes the unauthorized credit adjustment, the person 
must repay the amount recouped plus late payment interest determined 
pursuant to 30 U.S.C. 1721(a) and 30 CFR 218.150 from the date the 
unauthorized recoupment was taken until the date it is repaid. Unless 
the person filed a request for refund or credit pursuant to Sec. 230.453 
within 2 years of the making of the excess payment for which the 
unauthorized credit adjustment was reported, the excess payment is not 
subject to refund or recoupment.
    (2) If the unauthorized credit adjustment recouped a payment that 
MMS received less than 2 years before the date MMS received the Form 
MMS-2014 with the unauthorized credit adjustment, the person must repay 
the amount recouped plus late payment interest determined pursuant to 30 
U.S.C. 1721(a) and 30 CFR 218.150 from the date the unauthorized 
recoupment was taken until the date it is repaid. The report of the 
unauthorized credit adjustment on the Form MMS-2014 does not constitute 
a request for refund or credit that tolls the 2-year period in section 
10(a), 43 U.S.C. 1339(a). The person may file a request for refund or 
credit pursuant to section 230.453 for the payment for which the 
unauthorized credit adjustment was reported. MMS will review the request 
pursuant to the requirements of this subpart only if the request for 
refund or credit is received within 2 years of the making of the 
original payment for which the unauthorized credit adjustment was 
reported.
    (b) A person who reports an unauthorized credit adjustment to MMS on 
a Form MMS-2014 will be assessed $500 for each unauthorized credit 
adjustment reported.



Sec. 230.459  Stopping or tolling of the section 10(a) 2-year period.

    (a) The period of 2 years from the making of the excess payment, 
within which a request for refund or credit must be filed under section 
10(a), 43 U.S.C. 1339(a), will be:
    (1) Tolled by MMS's receipt of a substantially complete request for 
refund or credit pursuant to Sec. 230.453; or
    (2) Tolled by a general tolling notice issued by MMS and published 
in the Federal Register in circumstances where MMS believes a 
substantial number of requests for refund or credit could result as a 
consequence of a pending administrative or judicial proceeding or other 
action. The running of the 2-year period will be tolled for the time 
period specified in the notice; or
    (3) Stopped by an application for unitization of OCS leases with 
respect to any excess payment that may result from the reallocation of 
production among leases after the unit or revision is approved; or
    (4) Tolled by a notice filed by a person at the address stated in 
Sec. 230.453(f) stating that a specifically identified action or 
proceeding may result in payments made on an OCS lease becoming excess 
payments. The notice must include:
    (i) A list of affected leases and sales months;
    (ii) The specific action or proceeding that could result in payments 
becoming excess;
    (iii) An estimate of the amount that could be subject to a request 
for refund or credit; and
    (iv) The person's MMS-established payor code.
    (b) A request for refund or credit that is filed timely by a person 
who made an excess payment on an OCS lease does not stop or toll the 
running of the 2-year period with respect to any excess payment made by 
any other person on that lease.



Sec. 230.460  Lease suspension.

    If MMS suspends an OCS lease pursuant to 30 CFR 250.10(b)(6), a 
person who has made excess rental payments for the period of suspension 
may request a

[[Page 199]]

refund or credit of any excess payments pursuant to this subpart. If the 
request for refund or credit is filed more than 2 years after MMS 
received the excess rentals, the excess payment will not be refunded, 
recouped, or credited against future rentals due on the same lease.



Sec. 230.461  Transactions not subject to section 10.

    (a) A request for refund of, or any other action to recover, excess 
payments made by a refiner/purchaser under a royalty-in-kind contract 
for royalty oil produced from an OCS lease is not subject to section 10.
    (b) If MMS approves a unit agreement on the OCS, or a revision to a 
unit, a person may file amended Forms MMS-2014 within the time period 
MMS prescribes, reallocating production among its affected leases. A 
person must file a request for refund or credit pursuant to this subpart 
only if, and to the extent that, there is a net reduction in the royalty 
that person previously paid for the leases committed to the unit as a 
result of the amendments.
    (c) A person may amend Form MMS-2014 to adjust volume and royalty 
reports among OCS leases within a unit within the same sales month 
without filing a request for refund or credit pursuant to this subpart, 
except that a request for refund or credit must be filed to the extent 
that there is a net reduction in the royalty previously paid for the 
leases committed to the unit as a result of the amendments.
    (d) A person who pays more money than the total royalty due as 
reported on the Form MMS-2014 accompanying the payment, where all 
amounts reported on the Form MMS-2014 are correct, may submit a request 
for refund of the overpaid amounts. The request for refund is not 
subject to section 10's requirements unless the Form MMS-2014 includes 
reports for only one OCS lease. Any overpayment subject to this 
paragraph may not be recovered by recoupment.
    (e) A person may reduce an estimate balance, established for any 
lease product pursuant to MMS instructions, by submitting a credit 
adjustment on a Form MMS-2014, or a request for refund, for all or part 
of the established estimate balance. A credit adjustment or request for 
refund to recover all or part of an estimate balance authorized by this 
paragraph is not subject to the requirements of section 10.
    (f)(1) If adjustment of an estimated oil transportation allowance or 
estimated gas transportation allowance pursuant to 30 CFR 206.105(e) and 
206.157(e), respectively, results in an overpayment for any sales month 
because the estimated transportation costs were less than the actual 
costs, a person may submit a credit adjustment on a Form MMS-2014 to 
recoup, or may request a refund of, the overpayment. The credit 
adjustment or request for refund authorized by this paragraph is not 
subject to the requirements of section 10, and MMS approval is not 
required before reporting the credit adjustment.
    (2) If adjustment of an estimated gas processing allowance pursuant 
to 30 CFR 206.159(e) results in an overpayment for any sales month 
because the estimated processing costs were less than the actual costs, 
a person may submit a credit adjustment on a Form MMS-2014 to recoup, or 
may request a refund of, the overpayment. The credit adjustment or 
request for refund authorized by this paragraph is not subject to the 
requirements of section 10, and MMS approval is not required before 
reporting the credit adjustment.
    (3) If a person makes an error in the report of actual 
transportation or processing costs pursuant to paragraphs (f)(1) or 
(f)(2) of this section, any subsequent adjustment to the report that 
results in a credit is subject to section 10 and the requirements of 
this subpart.
    (g) If a person pays pursuant to an MMS order and challenges the 
obligation to pay in an administrative appeal or judicial action, and if 
the person is successful in a challenge to all or part of the MMS order 
to pay, section 10 does not apply to the refund or recoupment of the 
disputed payment or portion thereof.
    (h) MMS approval is not required for an adjustment by any person to 
the amount reported for a report month that results in a credit of not 
more than an amount established periodically by MMS and published in the

[[Page 200]]

Federal Register. However, no adjustment may be reported more than 2 
years after the date MMS received the Form MMS-2014 including the excess 
payment.



PART 232--INTEREST PAYMENTS [RESERVED]






PART 233--ESCROW AND INVESTMENTS [RESERVED]






PART 234--BONDING--PAYMENT LIABILITY [RESERVED]






PART 241--PENALTIES--Table of Contents




                      Subpart A--General Provisions

Sec.
241.20  Civil penalties authorized by statutes other than the Federal 
          Oil and Gas Royalty Management Act of 1982.

              Subpart B--Oil, Gas, and OCS Sulfur, General

241.50  Definitions.
241.51  Civil penalties authorized by the Federal Oil and Gas Royalty 
          Management Act of 1982.
241.52  Criminal penalties.
241.53  Assessments for nonperformance.

              Subpart C--Federal and Indian Oil [Reserved]

              Subpart D--Federal and Indian Gas [Reserved]

              Subpart E--Solid Minerals, General [Reserved]

                       Subpart F--Coal [Reserved]

               Subpart G--Other Solid Minerals [Reserved]

                    Subpart H--Geothermal [Reserved]

                    Subpart I--OCS Sulfur [Reserved]

    Authority: 25 U.S.C. 396 et seq.; 25 U.S.C. 396a et seq.; 25 U.S.C. 
2101 et seq.; 30 U.S.C. 181 et seq.; 30 U.S.C. 351 et seq.; 30 U.S.C. 
1001 et seq.; 30 U.S.C. 1701 et seq.; 43 U.S.C. 1301 et seq.; 43 U.S.C. 
1331 et seq.; and 43 U.S.C. 1801 et seq.



                      Subpart A--General Provisions



Sec. 241.20  Civil penalties authorized by statutes other than the Federal Oil and Gas Royalty Management Act of 1982.

    (a) Whenever a lessee, operator, revenue payor, or other authorized 
person fails to comply with any regulations, orders or notices, the 
appropriate MMS official shall give the lessee, operator, revenue payor, 
or other authorized person notice in writing to remedy any violations.
    (b) Failure by the lessee, operator, revenue payor, or other 
authorized person, or other party to complete the necessary remedial 
action within the time and in the manner prescribed by the notice may 
subject the lease to cancellation proceedings pursuant to 30 CFR 250.12 
for offshore leases, 43 CFR subpart 3163 and 3108 for Federal onshore 
leases, or provisions of 25 CFR for Indian leases.
    (c) The lessee, operator, revenue payor, or other authorized person, 
shall be subject to a penalty of not more than $500 per day for each day 
the violation specified in the notice continues beyond the date 
specified in the notice, not to exceed 60 days. In addition to this 
penalty or in lieu thereof, MMS can take steps to cancel the lease.
    (d) No penalty under this section shall be assessed until the person 
charged with a violation has been given the opportunity for a hearing. 
Hearings shall be held by the appropriate MMS official whose findings 
shall be conclusive unless an appeal is taken pursuant to 30 CFR part 
243.

[49 FR 37352, Sept. 21, 1984; 49 FR 40576, Oct. 17, 1984]



              Subpart B--Oil, Gas, and OCS Sulfur, General

    Authority: The Federal Oil and Gas Royalty Management Act of 1982 
(30 U.S.C. 1701 et seq.).



Sec. 241.50  Definitions.

    Terms used in subparts B, C, and D of this part shall have the same 
meaning as in 30 U.S.C. 1702.

[49 FR 37352, Sept. 21, 1984, as amended at 53 FR 1226, Jan. 15, 1988]

[[Page 201]]



Sec. 241.51  Civil penalties authorized by the Federal Oil and Gas Royalty Management Act of 1982.

    (a)(1) Notice of noncompliance. If the MMS believes that any person 
has failed or refused to comply with any statute, regulation, rule, 
order, lease, or permit governing the determination and collection of 
royalties on Federal or Indian lands or on the Outer Continental Shelf, 
the MMS may issue a notice of noncompliance which shall set forth the 
nature of the violation and the remedial action required.
    (2) The notice of noncompliance shall be served by personal service 
by an authorized representative of the MMS or by registered mail. 
Service by registered mail shall be deemed to occur when received or 5 
days after the date it is mailed, whichever is earlier.
    (3) When a notice of noncompliance is issued by the MMS under this 
section:
    (i) Unless the violation is corrected within 20 days (or such longer 
time as specified in the notice) from the date that the notice is 
served, the person upon whom the notice is served shall be liable for a 
penalty of up to $500 per violation for each day such violation 
continues, dating from the date of service of the notice;
    (ii) Unless the violation is corrected within 40 days (or such 
longer time as specified in the notice) from the date that the notice is 
served, the person upon whom the notice is served shall be liable for a 
penalty of up to $5,000 per violation for each day such violation 
continues;
    (iii) If the person upon whom the notice is served does not correct 
the violation within 20 days (or such longer time as specified in the 
notice) from the date that the notice is served, such person may, by 
that date, request a hearing on the record by filing a written request 
with the Hearings Division (Departmental), Office of Hearings and 
Appeals, U.S. Department of the Interior, 4015 Wilson Boulevard, 
Arlington, Virginia 22203.
    (4) If the person upon whom a notice of noncompliance has been 
served pursuant to paragraph (a)(3) of this section corrects the 
violations within 20 days (or such longer time as specified in the 
notice) from the date that the notice is served, no penalties shall be 
assessed by the MMS under this section and the person shall not be 
entitled to a hearing on the record provided for in paragraph 
(a)(3)(iii) of this section. The person may appeal the notice of 
noncompliance or other disputed MMS decision or order in accordance with 
the appeals procedures in 30 CFR part 243.
    (b)(1) Notice of noncompliance for intentional violations. In 
addition to the provisions of paragraph (a) of this section, the MMS may 
issue a notice of noncompliance for intentional violations, which shall 
set forth the nature of the violation and the remedial action required, 
to any person who--
    (i) Knowingly or willfully fails to make any payment due by the date 
as specified by statute, regulation, order, or terms of the lease;
    (ii) Knowingly or willfully fails to submit or submits false, 
inaccurate, or misleading data to the MMS in support of a royalty, 
rental, bonus, or other payment; or
    (iii) Knowingly or willfully prepares, maintains, or submits false, 
inaccurate, or misleading reports, notices, affidavits, records, data, 
or other written information.
    (2) A person served with a notice of noncompliance for an 
intentional violation under this paragraph shall be liable for a penalty 
of up to $10,000 per violation for each day such violation continues.
    (3) The notice of noncompliance for intentional violation shall be 
served in accordance with paragraph (a)(2) of this section.
    (4) A person who has been served with a notice of noncompliance for 
intentional violation issued pursuant to this subsection shall have 20 
days from the date of service to file a written request for a hearing on 
the record with the Hearings Division (Departmental), Office of Hearings 
and Appeals, U.S. Department of the Interior, 4015 Wilson Boulevard, 
Arlington, Virginia 22203.
    (c) Penalty notice. The MMS shall issue a penalty notice to any 
person subject to penalties under this section. The penalty notice shall 
set forth the amount of the penalty applicable for each day that the 
violation continues. The penalty amount shall be determined by MMS 
taking into account the

[[Page 202]]

severity of the violation and the person's history of noncompliance. The 
penalty for each day that a violation continues shall not exceed the 
amounts specified in paragraphs (a) and (b), of this section as 
applicable.
    (d) Penalties imposed under this section shall be in addition to 
interest assessed on payments not received by the MMS by the due date 
and assessments for later or incorrect reporting pursuant to part 218 of 
this chapter.
    (e) If the person served with a notice of noncompliance requests a 
hearing on the record pursuant to paragraph (a)(3)(iii) or paragraph 
(b)(4) of this section, penalties shall accrue each day until the person 
corrects the violations set forth in the notice of noncompliance. The 
Director, MMS, may suspend the requirement to correct the violations 
pending completion of the hearings provided by this section, but only if 
the Director, MMS, suspends the obligation in writing, and then only 
upon a determination, at the discretion of the Director, that such 
suspension will not be detrimental to the lessor and upon submission and 
acceptance of a bond deemed adequate to indemnify the lessor from loss 
or damage. The amount of the bond must be sufficient to cover any 
disputed amounts plus accrued penalties and interest. The MMS may 
require, at any time, adjustment in the amount of the bond for increases 
in the amount of the underlying obligations determined by MMS to be due, 
for penalties or for interest.
    (f) Hearing. If a person served with a notice of noncompliance has 
requested a hearing on the record in accordance with paragraph 
(a)(3)(iii) or (b)(4) of this section, the hearing shall be conducted by 
an Administrative Law Judge (Departmental), Office of Hearings and 
Appeals. After the hearing, the Administrative Law Judge shall issue a 
decision in accordance with the evidence presented and applicable law. 
Any party to a case adversely affected by a decision of the 
Administrative Law Judge may appeal that decision to the Interior Board 
of Land Appeals in accordance with the procedures set forth in 43 CFR 
part 4. A decision by the Interior Board of Land Appeals shall be a 
final order which may be appealed in accordance with paragraph (i) of 
this section.
    (g) The Director of the MMS shall issue an order assessing the 
penalty, in accordance with the penalty notice, against any person 
subject to penalties under paragraph (a) or (b) of this section who does 
not request a hearing on the record as provided in paragraph (a)(3)(iii) 
or (b)(4) of this section. The penalty assessment must be paid within 30 
days of its issuance and shall be a final order subject to collection 
pursuant to the provisions of paragraph (j) of this section.
    (h) On a case-by-case basis the Secretary, or his/her authorized 
representative, may compromise or reduce civil penalties under this 
section. The amount of any penalty under this section, as finally 
determined, may be deducted from any sums owing by the United States to 
the person charged.
    (i) Any person who has requested a hearing in accordance with 
paragraph (a) or (b) of this section within the time prescribed for such 
a hearing and who is aggrieved by a final order may seek review of such 
order in the U.S. District Court for the judicial district in which the 
violation allegedly took place. Review by the District Court shall be 
only on the administrative record and not de novo. Such action shall be 
barred unless filed within 90 days after the final order.
    (j) If any person fails to pay an assessment of a civil penalty 
under this section after the order making the assessment has become a 
final order, and if such person has not filed a petition for judicial 
review in accordance with paragraph (i) of this section, or, after a 
court, in an action brought under this section, has entered a final 
judgment in favor of the Secretary, the Court shall have jurisdiction to 
award the amount assessed plus interest assessed from the date of the 
expiration of the 90-day period referred to in paragraph (i) of this 
section. The amount of any penalty, as finally determined, may be 
deducted from any sum owing by the United States to the person charged.

[49 FR 37352, Sept. 21, 1984]



Sec. 241.52  Criminal penalties.

    Any person who commits an act for which a civil penalty is provided 
at 30

[[Page 203]]

U.S.C. 1719 shall be subject to criminal penalties as provided at 30 
U.S.C. 1720.

[49 FR 37352, Sept. 21, 1984]



Sec. 241.53  Assessments for nonperformance.

    Administrative costs arising out of certain defaults or violations 
of orders requiring the performance of certain duties by lessees, as set 
forth in the regulations in this part, constitute loss or damage to the 
United States the amount of which is difficult or impracticable of 
ascertainment. Therefore, the following amounts shall be deemed to cover 
such loss or damage and shall be payable upon receipt of notice from the 
Associate Director of such loss or damage.
    (a) For failure to comply with a written order or instructions of 
the Associate Director, $250 if compliance is not obtained within the 
time specified.
    (b) For failure to file sales contracts or division orders as 
required by lease terms, $25 for each violation, and for failure to 
submit pipeline run tickets, or other proper evidence of disposal as 
required by these regulations, $10 for each violation.

[47 FR 47775, Oct. 27, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983, 
further redesignated and amended at 53 FR 1226, Jan. 15, 1988]



              Subpart C--Federal and Indian Oil [Reserved]



              Subpart D--Federal and Indian Gas [Reserved]



              Subpart E--Solid Minerals, General [Reserved]



                       Subpart F--Coal [Reserved]



               Subpart G--Other Solid Minerals [Reserved]



                    Subpart H--Geothermal [Reserved]



                    Subpart I--OCS Sulfur [Reserved]



PART 242--NOTICES AND ORDERS [RESERVED]






PART 243--APPEALS--ROYALTY MANAGEMENT PROGRAM--Table of Contents




                      Subpart A--General Provisions

Sec.
243.1  Procedure.
243.2  Suspension of orders or decisions pending appeal.
243.3  Exhaustion of administrative remedies.
243.4  Service of official correspondence.

    Authority: 5 U.S.C. 301 et seq.; 25 U.S.C. 396 et seq.; 25 U.S.C. 
396a et seq.; 25 U.S.C. 2101 et seq.; 30 U.S.C. 181 et seq.; 30 U.S.C. 
351 et seq.; 30 U.S.C. 1001 et seq.; 30 U.S.C. 1701 et seq.; 31 U.S.C. 
9701; 43 U.S.C. 1301 et seq.; 43 U.S.C. 1331 et seq.; and 43 U.S.C. 1801 
et seq.



                      Subpart A--General Provisions



Sec. 243.1  Procedure.

    Except as may otherwise be provided in part 241 hereof, an order or 
decision issued under regulations administered by the Royalty Management 
Program may be appealed in accordance with the provisions of part 290 of 
this chapter.

[49 FR 37353, Sept. 21, 1984]

[[Page 204]]



Sec. 243.2  Suspension of orders or decisions pending appeal.

    (a) Compliance with any orders or decisions issued by the Royalty 
Management Program (RMP) of the Minerals Management Service (MMS), 
including orders for payments of royalty deficiencies (other than orders 
to pay additional royalties for the difference between a cents-per-ton 
royalty clause and an ad volorem royalty clause pursuant to the terms of 
coal leases following readjustment by the Bureau of Land Management 
(BLM)), rentals, interest, penalties (other than civil penalties 
provided for under section 109 of the Federal Oil and Gas Royalty 
Management Act of 1982, 30 U.S.C. 1719, and implemented in 30 CFR 
241.51), royalty-in-kind contract payments, or other assessments, shall 
be suspended by reason of an appeal having been taken pursuant to 30 CFR 
part 290 unless the Director, MMS, notifies the appellant in writing 
that the decision or order shall not be suspended pending appeal. Unless 
the amount under appeal is $1,000 or less, suspension of an order or 
decision requiring the payment of a specified amount of money shall be 
contingent upon the appellant's submission within a time period 
prescribed by MMS of an MMS-specified surety instrument deemed adequate 
to indemnify the lessor from loss or damage. Nothing in this paragraph 
shall be construed to prohibit an appellant from paying any demanded 
amount pending appeal. If the appeal is granted in whole or in part, the 
appellant will be entitled to a refund of the amount paid, without 
interest, in accordance with MMS refund procedures.
    (b)(1) For purposes of this section, an ``MMS-specified surety 
instrument'' for fluids (oil, gas, and geothermal) leases means either: 
An MMS-specified administrative appeal bond; an MMS-specified 
irrevocable letter of credit; Treasury book-entry bond or note; or 
financial institution book-entry certificate of deposit. The ``MMS-
specified surety instrument'' shall be in a form specified by MMS 
instructions or approved by MMS. A bond must be issued by a qualified 
surety company which has been approved by the Department of the 
Treasury. An irrevocable letter of credit or a certificate of deposit 
must be from a financial institution acceptable to MMS with a minimum 1-
year period of coverage subject to automatic renewal up to 5 years. The 
MMS will use a bankrating service to determine whether a financial 
institution has an acceptable rating to provide a surety instrument 
deemed adequate to indemnify the lessor from loss or damage. The MMS 
will accept only an ``MMS-specified surety instrument'' as qualified in 
this paragraph and in paragraph (c) of this section. The MMS will accept 
a single surety instrument that covers multiple amounts under appeal. 
The single surety instrument must be amended annually to either add new 
amounts or remove amounts that have been adjudicated. New amounts under 
appeal each year require a separate surety instrument until covered by 
the single surety instrument during the annual amendment.
    (2) For purposes of this section, an ``MMS-specified surety 
instrument'' for other than fluids (oil, gas, and geothermal) leases, is 
the BLM lease surety instrument which must be increased at the request 
of MMS to cover royalty and interest obligations. However, if BLM has no 
lease surety instrument coverage, or the appellant chooses to provide a 
separate surety instrument to MMS, or the appellant is not the lessee of 
record, then an ``MMS-specified surety instrument'' in accordance with 
paragraph (b)(1) of this section is required.
    (3) The ``MMS-specified surety instrument'' for RMP is subject to 
approval by a bond-approving officer. The designated bond-approving 
officer for RMP is the Associate Director for Royalty Management or 
delegated officials. The MMS will provide in writing to the appellant 
information and standard forms on ``MMS-specified surety instrument'' 
requirements.
    (c)(1) The amount of the bond, letter of credit, Treasury book-entry 
bond or note, or financial institution book-entry certificate of deposit 
will be determined by MMS and will include the principal amount owed 
plus any accrued interest owed and projected interest for a 1-year 
period. In the case of Treasury book-entry bonds or notes, the amount 
must be equal to 120 percent of the required surety amount.

[[Page 205]]

    (2) If a decision on the appeal is not made within 1 year from the 
date the appeal is filed, appellants who submitted a bond shall amend 
the bond amount to cover additional estimated interest for another 1-
year period. Appellants who submitted a letter of credit, a Treasury 
book-entry bond or note, or a financial institution book-entry 
certificate of deposit shall submit, at least 10 calendar days prior to 
the expiration date, a new surety instrument or an amendment to the 
existing surety instrument for an additional 1-year period of time with 
an increase in the amount to cover estimated interest for a 1-year 
period. In all cases, MMS will determine the additional estimated 
interest and amended surety instrument amount. If a surety instrument is 
not amended to include the additional interest coverage at least 10 
calendar days prior to the expiration date of the surety instrument, MMS 
may make a demand against and collect from the surety. The collection 
against the surety will include the principal amount owed plus accrued 
interest.
    (d)(1) An MMS decision or order that is appealed to the Interior 
Board of Land Appeals pursuant to 30 CFR part 290 and 43 CFR part 4, 
shall be suspended pending appeal if the appellant submits or maintains 
a surety instrument in accordance with the provisions of this section, 
unless the Director or the Deputy Commissioner of Indian Affairs (when 
Indian lands are involved) notifies the appellant in writing at the time 
the decision or order is issued that it will not be suspended pending 
appeal. The Director or the Deputy Commissioner of Indian Affairs may 
deny suspension of an appeal to avoid irreparable harm to the lessor.
    (2) In any case where the Director of the Office of Hearings and 
Appeals or the Secretary takes jurisdiction of an administrative appeal 
involving a Royalty Management Program decision or order pursuant to 43 
CFR part 4.5 and grants a suspension of effectiveness of the decision or 
order subject to the submission of an adequate surety instrument, the 
appellant must maintain that surety instrument in accordance with the 
requirements of this section.
    (e) An Interior Board of Land Appeals decision, other final action 
of the Department of the Interior regarding a Royalty Management Program 
decision or order, or a Royalty Management Program decision or order 
which is made effective pending appeal under paragraph (a), which is the 
subject of an action for judicial review in a United States District 
Court of competent jurisdiction will be suspended pending judicial 
review pursuant to 5 U.S.C. 705 if the plaintiff seeking review submits 
or maintains a surety instrument in accordance with the provisions of 
this section, unless the Government notifies the court that it will not 
agree to a suspension of the effectiveness of the decision or order 
pending judicial review.
    (f) The MMS may initiate collection against a surety instrument if:
    (1) The MMS Director decides an administrative appeal adversely to 
the appellant, and the appellant fails either to pay the disputed amount 
or pursue a further administrative appeal and maintain an adequate 
surety instrument pending such appeal;
    (2) The Interior Board of Land Appeals, the Director of the Office 
of Hearings and Appeals, an Assistant Secretary, or the Secretary 
decides an administrative appeal adversely to the appellant, and the 
appellant fails either to pay the disputed amount or pursue judicial 
review and maintain an adequate surety instrument pending such judicial 
review, in accordance with paragraph (e);
    (3) A court of competent jurisdiction issues a final nonappealable 
decision adverse to the appellant/plaintiff and the appellant/plaintiff 
fails to pay the disputed amount; or
    (4) The appellant fails to increase the amount of the surety 
instrument as required under paragraph (c) or otherwise fails to 
maintain an adequate surety instrument in effect.

[57 FR 44997, Sept. 30, 1992]



Sec. 243.3  Exhaustion of administrative remedies.

    In order to exhaust administrative remedies, a decision or order of 
MMS' Royalty Management Program must be appealed pursuant to 30 CFR part 
290 to the Director (or the Deputy Commissioner of Indian Affairs when 
Indian lands are involved), and subsequently

[[Page 206]]

to the Interior Board of Land Appeals under 30 CFR part 290.7 and 43 CFR 
part 4 unless the order has been made effective by the Director, or by 
the Assistant Secretary for Land and Minerals Management, or by the 
Assistant Secretary for Indian Affairs, or by the Interior Board of Land 
Appeals pursuant to 43 CFR part 4, as applicable.

[57 FR 44998, Sept. 30, 1992]



Sec. 243.4  Service of official correspondence.

    (a) Method of service. Official correspondence issued by the Royalty 
Management Program (RMP) will be served by sending the document 
certified or registered mail, return receipt requested, to the addressee 
of record established in paragraph (b) of this section. Instead of 
certified or registered mail, RMP may deliver the document personally to 
the addressee of record and obtain a signature acknowledging the 
addressee's receipt of the document. Official correspondence includes 
all RMP orders that are appealable in accordance with the provisions of 
this part and 30 CFR part 290.
    (b) Addressee of record. (1) The addressee of record for 
administrative correspondence for refiners participating in the 
government's Royalty-in-Kind (RIK) Program is the position title, 
department name and address, or individual name and address identified 
in the executed royalty oil sale contract. A different position title, 
department name and address, or individual name and address may be 
identified, in writing, by the refiner/purchaser for billing purposes. 
The refiner must notify the Minerals Management Service (MMS), in 
writing, of all addressee changes.
    (2) The addressee of record for serving official correspondence on 
anyone required to report energy and mineral resources removed from 
Federal and Indian leases to the RMP Production Accounting and Auditing 
System is the most recent position title, department name and address, 
or individual name and address that RMP has in its records for the 
reporter/payor. The reporter/payor is responsible for notifying RMP, in 
writing, of any addressee changes.
    (3) The addressee of record for serving official correspondence 
concerning onshore Federal leases is the current lessee of record with 
the Bureau of Land Management. For Indian leases, the addressee of 
record is the current lessee of record with the Bureau of Indian 
Affairs. For offshore leases, the addressee of record is the current 
lessee of record with the MMS Offshore Minerals Management Program. The 
lessee is responsible for notifying the appropriate Government office of 
any addressee changes.
    (4) The addressee of record for serving official correspondence in 
connection with reviews and audits of payor records is the position 
title, department name and address, or individual name and address 
designated, in writing, by the company at the initiation of the audit, 
or the most recent addressee that was specified, in writing, by the 
payor.
    (5) The addressee of record for serving official correspondence 
relating to reporting on the ``Report of Sales and Royalty Remittance'' 
(Form MMS-2014) is the most recent position title, department name and 
address, or individual name and address specified, in writing, by the 
payor. The payor is responsible for notifying the Royalty Management 
Program, in writing, of any addressee changes.
    (6) The addressee of record for serving official correspondence in 
connection with remittances pertaining to rental and bonuses from 
nonproducing Federal leases is the most recent position title, 
department name and address, or individual name and address maintained 
in RMP records. The payor is responsible for notifying RMP, in writing, 
of any addressee changes.
    (7) The addressee of record for serving official correspondence 
including orders, demands, invoices, or decisions, and other actions 
identified with payors reporting to the RMP Auditing and Financial 
System not identified above is the position title, department name and 
address or individual name and address for the payor identified on the 
most recent Payor Confirmation Report (Report No. ARR 290R) of a Payor 
Information Form (PIF) (Form MMS-4025 or Form MMS-4030) returned by RMP 
to the payor for the Federal or

[[Page 207]]

Indian lease (see 30 CFR 210.51 and 210.201).
    (8) In the event official correspondence is applicable to more than 
one category identified in paragraphs (b) (1) through (7) of this 
section, MMS may serve the official correspondence in accordance with 
the requirements of any one paragraph.
    (c) Dates of service. Except as provided in paragraph (d) of this 
section, official correspondence is considered served on the date that 
it is received at the address of record established in accordance with 
paragraph (b) of this section, as evidenced by a signed receipt of any 
person at that address. If official correspondence is served both 
personally and by registered or certified mail, the date of service is 
the earlier of the two dates, if they are different.
    (d) Constructive service. (1) If delivery cannot be consummated 
after reasonable effort at the address of record established in 
accordance with paragraph (b) of this section, official correspondence 
will be deemed to have been constructively served 7 days after the date 
that the document is mailed.
    (2) This provision covers such situations as nondelivery because the 
addressee has moved without filing a forwarding address, the forwarding 
order had expired, delivery was expressly refused, or the document was 
unclaimed where the attempt to deliver is substantiated by U.S. Postal 
Service authorities.

[56 FR 5949, Feb. 14, 1991; 56 FR 9251, Mar. 5, 1991; 58 FR 64903, Dec. 
10, 1993]

[[Page 208]]



                         SUBCHAPTER B--OFFSHORE





PART 250--OIL AND GAS AND SULPHUR OPERATIONS IN THE OUTER CONTINENTAL SHELF--Table of Contents




                           Subpart A--General

Sec.
250.0  Authority for information collection.
250.1  Documents incorporated by reference.
250.2  Definitions.
250.3  Performance requirements.
250.4  Jurisdiction.
250.5  Functions.
250.6  Oral approvals.
250.7  Right of use and easement.
250.8  Designation of operator.
250.9  Local agent.
250.10  Suspension of production or other operations.
250.11  Determination of well producibility.
250.12  Cancellation of leases.
250.13  How does production, drilling, or well-reworking affect your 
          lease term?
250.14  Reinjection and subsurface storage of gas.
250.15  Identification.
250.16  Reimbursement.
250.17  Information and forms.
250.18  Data and information to be made available to the public.
250.19  Accident reports.
250.20  Safe and workmanlike operations.
250.21  Access to facilities.
250.22  Best available and safest technologies (BAST).
250.23  Report of cessation of production.
250.24  Appeals, general.
250.25  Reports and investigations of apparent violations.
250.26  Archaeological reports and surveys.

       Subpart B--Exploration and Development and Production Plans

250.30  General requirements.
250.31  Preliminary activities.
250.32  Well location and spacing.
250.33  Exploration Plan.
250.34  Development and Production Plan.

               Subpart C--Pollution Prevention and Control

250.40  Pollution prevention.
250.41  Inspection of facilities.
250.44  Definitions concerning air quality.
250.45  Facilities described in a new or revised Exploration Plan or 
          Development and Production Plan.
250.46  Existing facilities.

               Subpart D--Oil and Gas Drilling Operations

250.50  Control of wells.
250.51  General requirements.
250.52  Welding and burning practices and procedures.
250.53  Electrical equipment.
250.54  Well casing and cementing.
250.55  Pressure testing of casing.
250.56  Blowout preventer systems and system components.
250.57  Blowout preventer systems tests, actuations, inspections, and 
          maintenance.
250.58  Well-control drills.
250.59  Diverter systems.
250.60  Mud program.
250.61  Securing of wells.
250.62  Field drilling rules.
250.63  Supervision, surveillance, and training.
250.64  Applications for permit to drill.
250.65  Sundry notices and reports on wells.
250.66  Well records.
250.67  Hydrogen sulfide.

            Subpart E--Oil and Gas Well-Completion Operations

250.70  General requirements.
250.71  Definition.
250.72  Equipment movement.
250.73  Emergency shutdown system.
250.74  Hydrogen sulfide.
250.75  Subsea completions.
250.76  Crew instructions.
250.77  Welding and burning practices and procedures.
250.78  Electrical requirements.
250.79  Well-completion structures on fixed platforms.
250.80  Diesel engine air intakes.
250.81  Traveling-block safety device.
250.82  Field well-completion rules.
250.83  Approval and reporting of well-completion operations.
250.84  Well-control fluids, equipment, and operations.
250.85  Blowout prevention equipment.
250.86  Blowout preventer system testing, records, and drills.
250.87  Tubing and wellhead equipment.

             Subpart F--Oil and Gas Well-Workover Operations

250.90  General requirements.
250.91  Definitions.
250.92  Equipment movement.
250.93  Emergency shutdown system.
250.94  Hydrogen sulfide.
250.95  Subsea workovers.
250.96  Crew instructions.
250.97  Welding and burning practices and procedures.

[[Page 209]]

250.98  Electrical requirements.
250.99  Well-workover structures on fixed platforms.
250.100  Diesel engine air intakes.
250.101  Traveling-block safety device.
250.102  Field well-workover rules.
250.103  Approval and reporting for well-workover operations.
250.104  Well-control fluids, equipment, and operations.
250.105  Blowout prevention equipment.
250.106  Blowout preventer system testing, records, and drills.
250.107  Tubing and wellhead equipment.
250.108  Wireline operations.

                     Subpart G--Abandonment of Wells

250.110  General requirements.
250.111  Approvals.
250.112  Permanent abandonment.
250.113  Temporary abandonment.
250.114  Site clearance verification.

            Subpart H--Oil and Gas Production Safety Systems

250.120  General requirements.
250.121  Subsurface safety devices.
250.122  Design, installation, and operation of surface-production 
          safety systems.
250.123  Additional production system requirements.
250.124  Production safety-system testing and records.
250.125  Safety device training.
250.126  Quality assurance and performance of safety and pollution 
          prevention equipment.
250.127  Hydrogen sulfide.

                   Subpart I--Platforms and Structures

250.130  General requirements.
250.131  Application for approval.
250.132  Platform Verification Program requirements.
250.133  Certified Verification Agent duties and nomination.
250.134  Environmental conditions.
250.135  Loads.
250.136  General design requirements.
250.137  Steel platforms.
250.138  Concrete-gravity platforms.
250.139  Foundation.
250.140  Marine operations.
250.141  Inspection during construction.
250.142  Periodic inspection and maintenance.
250.143  Platform removal and location clearance.
250.144  Records.

             Subpart J--Pipelines and Pipeline Rights-of-Way

250.150  General requirements.
250.151  Definitions.
250.152  Design requirements for DOI pipelines.
250.153  Installation, testing, and repair requirements for DOI 
          pipelines.
250.154  Safety equipment requirements for DOI pipelines.
250.155  Inspection requirements for DOI pipelines.
250.156  Abandonment and out-of-service requirements for DOI pipelines.
250.157  Applications.
250.158  Reports.
250.159  General requirements for a pipeline right-of-way grant.
250.160  Applications for a pipeline right-of-way grant.
250.161  Granting a pipeline right-of-way.
250.162  Requirements for construction under a right-of-way grant.
250.163  Assignment of a right-of-way grant.
250.164  Relinquishment of a right-of-way grant.

                 Subpart K--Oil and Gas Production Rates

250.170  Definitions for production rates.
250.171  General requirements and classification of reservoirs.
250.172  Oil and gas production rates.
250.173  Well production testing.
250.174  Bottomhole pressure survey.
250.175  Flaring or venting gas and burning liquid hydrocarbons.
250.176  Downhole commingling.
250.177  Enhanced oil and gas recovery operations.

Subpart L--Oil and Gas Production Measurement, Surface Commingling, and 
                                Security

250.180  Measurement of liquid hydrocarbons.
250.181  Measurement of gas.
250.182  Surface commingling of production.
250.183  Site security.

                         Subpart M--Unitization

250.190  What is the purpose of this subpart?
250.191  What are the requirements for unitization?
250.192  What if I have a competitive reservoir on a lease?
250.193  How do I apply for voluntary unitization?
250.194  How will MMS require unitization?

                    Subpart N--Remedies and Penalties

250.200  Remedies.
250.201  Hearings.
250.202  Hearing procedures.
250.203  Reviewing Officer's decision.
250.204  Appeals from Reviewing Officer's decision.
250.205  Reopening a case.
250.206  Civil penalties.

[[Page 210]]

                           Subpart O--Training

250.209  Question index table.
250.210  Definitions.
250.211  What is MMS's goal for well control and production safety 
          systems training?
250.212  What type of training must I provide for my employees?
250.213  What documentation must I provide to trainees?
250.214  How often must I provide training to my employees and for how 
          many hours?
250.215  Where must I get training for my employees?
250.216  Where can I find training guidelines for other topics?
250.217  Can I get an exception to the training requirements?
250.218  Can my employees change job certification?
250.219  What must I do if I have temporary employees or on-the-job 
          trainees?
250.220  What must manufacturer's representatives in production safety 
          systems do?
250.221  May I use alternative training methods?
250.222  What is MMS looking for when it reviews an alternative training 
          program?
250.223  Who may accredit training organizations to teach?
250.224  How long is a training organization's accreditation valid?
250.225  What information must a training organization submit to MMS?
250.226  What additional requirements must a training organization 
          follow?
250.227  What are MMS's requirements for the written test?
250.228  What are MMS's requirements for the hands-on simulator and well 
          test?
250.229  What elements must a basic course cover?
250.230  If MMS tests employees at my worksite, what must I do?
250.231  If MMS tests trainees at a training organization's facility, 
          what must occur?
250.232  Why might MMS conduct its own tests?
250.233  Can a training organization lose its accreditation?

                      Subpart P--Sulphur Operations

250.250  Performance standard.
250.251  Definitions.
250.252  Applicability.
250.253  Determination of sulphur deposit.
250.254  General requirements.
250.260  Drilling requirements.
250.261  Control of wells.
250.262  Field rules.
250.263  Well casing and cementing.
250.264  Pressure testing of casing.
250.265  Blowout preventer systems and system components.
250.266  Blowout preventer systems tests, actuations, inspections, and 
          maintenance.
250.267  Well-control drills.
250.268  Diverter systems.
250.269  Mud program.
250.270  Securing of wells.
250.271  Supervision, surveillance, and training.
250 272  Application for permit to drill.
250.273  Sundry notices and reports on wells.
250.274  Well records.
250.280  Well-completion and well-workover requirements.
250.281  Crew instructions.
250.282  Approvals and reporting of well-completion and well-workover 
          operations.
250.283  Well-control fluids, equipment, and operations.
250.284  Blowout prevention equipment.
250.285  Blowout preventer system testing, records, and drills.
250.286  Tubing and wellhead equipment.
250.290  Production requirements.
250.291  Design, installation, and operation of production systems.
250.292  Additional production and fuel gas system requirements.
250.293  Safety-system testing and records.
250.294  Safety device training.
250.295  Production rates.
250.296  Production measurement.
250.297  Site security.

    Authority: 43 U.S.C. 1331, et seq.

    Source: 53 FR 10690, Apr. 1, 1988, unless otherwise noted.



                           Subpart A--General



Sec. 250.0  Authority for information collection.

    The information collection requirements in part 250 have been 
approved by the Office of Management and Budget (OMB) under 44 U.S.C. 
3501 et seq. and assigned clearance numbers as indicated in this 
section. Send comments regarding the burdens indicated for a specific 
information collection or any other aspect of the collection of 
information pursuant to provisions of this part, including suggestions 
for reducing the burden, to the Information Collection Clearance 
Officer; Minerals Management Service; Mail Stop 2300; 381 Elden Street; 
Herndon, Virginia 22070-4817 and the Office of Management and Budget; 
Paperwork Reduction Project 1010-XXXX; Washington, DC 20503.
    (a) The information collection requirements in subpart A, General, 
have

[[Page 211]]

been approved by the Office of Management and Budget (OMB) under 44 
U.S.C. 3507 and assigned clearance number 1010-0030. The information is 
being collected to inform the Minerals Management Service (MMS) of 
general operations on the Outer Continental Shelf (OCS). The information 
is used to ensure that operations on the OCS will meet statutory and 
regulatory requirements, provide for safety and protection of the 
environment, and result in diligent exploration, development, and 
production on OCS leases. The requirement to respond is mandatory. 
Public reporting burden for this collection of information is estimated 
to average 5 hours per response, including the time for reviewing 
instructions, searching existing data sources, gathering and maintaining 
the data needed, and completing and reviewing the collection of 
information. Send comments regarding this burden estimate or any other 
aspect of this collection of information, including suggestions for 
reducing the burden, to the Information Collection Clearance Officer; 
Minerals Management Service; Mail Stop 2300, 381 Elden Street; Herndon, 
Virginia 22070-4817, and the Office of Management and Budget; Paperwork 
Reduction Project 1010-0030; Washington, DC 20503.
    (b) The information collection requirements in subpart B, 
Exploration and Development and Production Plans, have been approved by 
OMB under 44 U.S.C. 3507 and assigned clearance number 1010-0049. The 
information is being collected to inform MMS, States, and the public of 
the planned exploration, development, and production activities on the 
OCS. The information is used to ensure that operations on the OCS will 
meet statutory and regulatory requirements, provide for safety and 
protection of the environment, and result in diligent development of 
leases. The requirement to respond is mandatory.
    (c) The information collection requirements in subpart C, Pollution 
Prevention and Control, have been approved by OMB under 44 U.S.C. 3507 
and assigned clearance number 1010-0057. The information is being 
collected to inform MMS of potential pollution of the environment. The 
information is used to identify potential sources of pollution for the 
purpose of preventing incidents of pollution. The requirement to respond 
is mandatory.
    (d) The information collection requirements in subpart D, Drilling 
Operations, have been approved by OMB under 44 U.S.C. 3501 et seq. and 
assigned clearance number 1010-0053. The information is being collected 
to inform MMS of the equipment and procedures lessees plan to use in 
drilling activities on the OCS. The information is used to ensure that 
drilling operations are safe and comply with standards to limit 
pollution. The requirement to respond is mandatory under 43 U.S.C. 1334. 
Public reporting burden for this collection of information is estimated 
to average 5.1 hours per response, including time for reviewing 
instructions, searching existing data sources, gathering and maintaining 
the data needed, and completing and reviewing the collection of 
information. Comments submitted relative to this information collection 
should reference Paperwork Reduction Project 1010-0053.
    (e) The information collection requirements in subpart E, Well-
Completion Operations, have been approved by OMB under 44 U.S.C. 3501 et 
seq. and assigned clearance number 1010-0067. The information is being 
collected to inform MMS of the equipment and procedures lessees plan to 
use during well-completion operations. The information is used to ensure 
that well-completion operations are safe and comply with standards to 
limit pollution. The requirement to respond is mandatory under 43 U.S.C. 
1334. Public reporting burden for this collection of information is 
estimated to average .5 hour per response, including time for reviewing 
instructions, searching existing data sources, gathering and maintaining 
the data needed, and completing and reviewing the collection of 
information. Comments submitted relative to this information collection 
should reference Paperwork Reduction Project 1010-0067.
    (f) The information collection requirements in subpart F, Well-
Workover Operations, have been approved by OMB under 44 U.S.C. 3501 et 
seq. and assigned clearance number 1010-0043. The information is being 
collected to inform MMS of the equipment

[[Page 212]]

and procedures lessees plan to use during well-workover operations. The 
information is used to ensure that well-workover operations are safe and 
comply with standards to limit pollution. The requirement to respond is 
mandatory under 43 U.S.C. 1334. Public reporting burden for this 
collection of information is estimated to average .5 hour per response, 
including time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing the collection of information. Comments submitted relative to 
this information collection should reference Paperwork Reduction Project 
1010-0043.
    (g) The information collection requirements in subpart G, 
Abandonment of Wells, have been approved by OMB under 44 U.S.C. 3507 and 
assigned clearance number 1010-0079. The information is collected to 
inform MMS of the lessees' plans for temporarily abandoned wells. The 
requirement to respond is mandatory.
    (h) The information collection requirements in subpart H, Production 
Safety Systems, have been approved by OMB under 44 U.S.C. 3507 and 
assigned clearance number 1010-0059. The information is being collected 
to inform MMS of the equipment and procedures lessees plan to use during 
the production operations. The information is used to ensure that oil 
and gas are produced in a manner which provides for safety of operations 
and protection of the environment. The requirement to respond is 
mandatory.
    (i) The information collection requirements in subpart I, Platforms 
and Structures, have been approved by OMB under 44 U.S.C. 3507 and 
assigned clearance number 1010-0058. The information is being collected 
to inform MMS of the design, fabrication, and installation of platforms 
on the OCS. The information is used to ensure the structural integrity 
of platforms installed on the OCS. The requirement to respond is 
mandatory.
    (j) The information collection requirements in subpart J, Pipelines 
and Pipeline Rights-of-Way, have been approved by OMB under 44 U.S.C. 
3507 and assigned clearance number 1010-0050. The information is being 
collected to inform MMS of the location, design, and operation of 
pipelines on the OCS. The information is used to ensure that pipelines 
on the OCS will transport oil and gas in a manner which provides for 
safety of operations and protection of the environment. The requirement 
to respond is mandatory.
    (k) The information collection requirements in subpart K, Production 
Rates, have been approved by OMB under 44 U.S.C. 3507 and assigned 
clearance number 1010-0041. The information is being collected to inform 
MMS of production rates for hydrocarbons produced on the OCS. The 
information is used to ensure that wells are produced at rates which 
provide for efficient production of available hydrocarbons. The 
requirement to respond is mandatory.
    (l) The information collection requirements in subpart L, Production 
Measurement, Surface Commingling, and Security, have been approved by 
OMB under 44 U.S.C. 3507 and assigned clearance number 1010-0051. The 
information is being collected to inform MMS of the measurement of 
production, the commingling of hydrocarbons, and site-security plans and 
is used to ensure that produced hydrocarbons are measured and commingled 
in a manner which results in accurate royalty payments. The requirement 
to respond is mandatory.
    (m) The information collection requirements in subpart M, 
Unitization, have been approved by OMB under 44 U.S.C. 3507 and assigned 
clearance number 1010-0068. The information is being collected to inform 
MMS of the unitization of leases. The information is used to ensure that 
unitization is conducted in a manner which prevents waste, conserves 
natural resources, and protects correlative rights. The requirement to 
respond is mandatory.
    (n) The information collection requirements in subpart N, Remedies 
and Penalties, have been approved by OMB under 44 U.S.C. 3501 et seq. 
and assigned clearance number 1010-0038. The information is being 
collected to inform MMS of evidence relating to violations of provisions 
of the Act, leases, and OCS rules. The information is used to review 
violations and determine whether the imposition of a civil penalty is 
warranted. The requirement to respond

[[Page 213]]

is mandatory under 43 U.S.C. 1334. Public reporting burden for this 
collection of information is estimated to average 80 hours per response, 
including time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing the collection of information. Comments submitted relative to 
this information collection should reference Paperwork Reduction Project 
1010-0038.
    (o) The information collection requirements for Form MMS-123, 
Application for Permit to Drill, contained in subpart D, Drilling 
Operations; subpart E, Well-Completion Operations; and subpart P, 
Sulphur Operations, have been approved by OMB under 44 U.S.C. 3501 et 
seq. and assigned clearance number 1010-0044. The information is being 
collected to ascertain the conditions of a drilling site for the purpose 
of mitigating hazards inherent in drilling operations and to determine 
whether the drilling operations are being conducted in a safe and 
environmentally sound manner. The requirement to respond is mandatory 
under 43 U.S.C. 1334. Public reporting burden for this collection of 
information is estimated to average 1.5 hours per response, including 
the time for reviewing instructions, searching existing data sources, 
gathering and maintaining the data needed, and completing and reviewing 
the collection of information. Comments submitted relative to this 
information collection should reference Paperwork Reduction Project 
1010-0044.
    (p) The information collection requirements for Form MMS-124, Sundry 
Notices and Reports on Wells, contained in subpart D, Drilling 
Operations; subpart E, Well-Completion Operations; subpart F, Well-
Workover Operations; subpart G, Abandonment of Wells; and subpart P, 
Sulphur Operations, have been approved by OMB under 44 U.S.C. 3501 et 
seq. and assigned clearance number 1010-0045. The information is being 
collected to evaluate and approve or disapprove the adequacy of the 
equipment and/or procedures which the lessee plans to use during the 
conduct of drilling, production, well-completion, and well-workover 
operations, including deepening and plugging back and well-abandonment 
operations, including temporary abandonments where the wellbore will be 
re-entered and completed or permanently abandoned. The requirement to 
respond is mandatory under 43 U.S.C. 1334. Public reporting burden for 
this collection of information is estimated to average 1 hour per 
response, including the time for reviewing instructions, searching 
existing data sources, gathering and maintaining the data needed, and 
completing and reviewing the collection of information. Comments 
submitted relative to this information collection should reference 
Paperwork Reduction Project 1010-0045.
    (q) The information collection requirements for Form MMS-125, Well 
Summary Report, contained in subpart D, Drilling Operations; subpart E, 
Well-Completion Operations; subpart F, Well-Workover Operations; and 
subpart P, Sulphur Operations, have been approved by OMB under 44 U.S.C. 
3501 et seq. and assigned clearance number 1010-0046. The information is 
being collected to ensure that MMS's District Supervisors have accurate 
data and information on the wells under their jurisdiction and to ensure 
compliance with approved plans. The requirement to respond is mandatory 
under 43 U.S.C. 1334. Public reporting burden for this collection of 
information is estimated to average 1 hour per response, including the 
time for reviewing instructions, searching existing data sources, 
gathering and maintaining the data needed, and completing and reviewing 
the collection of information. Comments submitted relative to this 
information collection should reference Paperwork Reduction Project 
1010-0046.
    (r) The information collection requirements for Form MMS-126, Well 
Potential Test Report and Request for Maximum Production Rate (MPR), 
contained in subpart K, Production Rates, have been approved by OMB 
under 44 U.S.C. 3501 et seq. and assigned clearance number 1010-0039. 
The information is being collected to provide MMS with data concerning 
the production potential of an oil or gas well or the purpose of 
determining a well maximum production rate. The requirement to respond 
is mandatory under 43 U.S.C. 1334. Public reporting burden for this 
collection of information is 1 hour

[[Page 214]]

per response, including the time for reviewing instructions, searching 
existing data sources, gathering and maintaining the data needed, and 
completing and reviewing the collection of information. Comments 
submitted relative to this information collection should reference 
Paperwork Reduction Project 1010-0039.
    (s) The information collection requirements for Form MMS-127, 
Request for Reservoir Maximum Efficient Rate (MER), contained in subpart 
K, Production Rates, have been approved by OMB under 44 U.S.C. 3501 et 
seq. and assigned clearance number 1010-0018. The information is being 
collected to determine whether the lessee has correctly classified an 
oil, gas, or oil-with-associated-gas-cap reservoir, as sensitive or 
nonsensitive, and to determine a reservoir MER which will prevent 
detriment to ultimate oil and gas recovery. The requirement to respond 
is mandatory under 43 U.S.C. 1334. Public reporting burden for this 
collection of information is estimated to average 1 hour per response, 
including the time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing the collection of information. Comments submitted relative to 
this information collection should reference Paperwork Reduction Project 
1010-0018.
    (t) The information collection requirements for Form MMS-128, 
Semiannual Well Test Report, contained in subpart K, Production Rates, 
have been approved by OMB under 44 U.S.C. 3501 et seq. and assigned 
clearance number 1010-0017. The information is being collected to verify 
the production capacity of each oil and gas completion and to revise 
MPR's accordingly. The requirement to respond is mandatory under 43 
U.S.C. 1334. Public reporting burden for this collection of information 
is estimated to average 2 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the collection 
of information. Comments submitted relative to this information 
collection should reference Paperwork Reduction Project 1010-0017.
    (u) The information collection requirements in Subpart O, Training, 
have been approved by OMB under 44 U.S.C. 3501 et seq. and assigned 
clearance number 1010-0078. The information is being collected to inform 
MMS that applicable training programs are sufficient to meet safety and 
environmental requirements and that the programs are being carried out. 
The information is used to ensure that workers are properly trained to 
operate in the OCS. The requirement to respond is mandatory under 43 
U.S.C. 1334. Public reporting burden for this collection of information 
is estimated to average 5 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the collection 
of information. Comments submitted relative to this information 
collection should reference Paperwork Reduction Project 1010-0078.
    (v) The information collection requirements in subpart P, Sulphur 
Operations, have been approved by OMB under 44 U.S.C. 350l et seq. and 
assigned clearance number 1010-0086. The information is collected to 
inform MMS about sulphur exploration and development operations in the 
OCS. The information concerns activities to discover, define, develop, 
produce, store, measure, and transport sulphur and is used to assure 
that leasehold operations comply with statutory requirements, provide 
for operational safety and environmental protection, and will result in 
proper and timely operations on OCS sulphur leases. The requirement to 
respond is mandatory in accordance with 43 U.S.C. 1334. Public reporting 
burden for this information is estimated to average 211 hours per 
respondent, including the time for reviewing instructions, searching 
existing data sources, gathering and maintaining the data needed, and 
completing and reviewing the collection of information. Comments 
relative to this information collection should reference Paperwork 
Reduction Project 1010-0086.

[53 FR 10690, Apr. 1, 1988, as amended at 55 FR 47752, Nov. 15, 1990; 56 
FR 1914, Jan. 18, 1991; 56 FR 2685, Jan. 24, 1991; 56 FR 21954, May 13, 
1991; 56 FR 32098, July 15, 1991; 58 FR 49926, Sept. 24, 1993]

[[Page 215]]



Sec. 250.1  Documents incorporated by reference.

    The documents listed below are incorporated by reference as 
requirements in this part. This incorporation by reference was approved 
by the Director of the Federal Register in accordance with 5 U.S.C. 
552(a) and 1 CFR part 51. MMS will publish a notice of any changes in 
these documents in the Federal Register. The rule change will become 
effective without notice and prior opportunity to comment if MMS 
determines that the revisions to a previously incorporated document are 
minor, result in safety improvements, or represent new industry standard 
technology and do not impose undue costs on the affected parties. MMS 
will go through the notice and comment procedure to change the documents 
incorporated by reference or into this section when MMS proposes to 
include documents not previously incorporated by reference; a new 
edition of a document already incorporated by reference introduces 
controversial issues, or imposes substantial new costs on industry; MMS 
proposes that a document cover parties not previously affected by the 
document in question; or MMS believes it would be in the best interest 
of the public to solicit comments on a new edition. Each document or 
specific portion thereof is incorporated by reference in the 
corresponding sections noted. The entire document is incorporated by 
reference, unless the text of the corresponding sections in this part 
call for compliance with specific portions of the listed documents. In 
each instance, the applicable document is the specific edition or 
specific edition and supplement or addendum cited in this section. In 
accordance with Sec. 250.3, Performance requirements, a lessee may 
comply with a later edition of a specific document incorporated by 
reference provided the lessee demonstrates that compliance with the 
later edition provides a degree of protection, safety, or performance 
equal to or better than that which would be achieved by compliance with 
the listed edition and provided the lessee obtains the prior written 
approval of the authorized MMS official, for such alternate compliance. 
The list includes the name and address of at least one organization from 
whom the reference document may be obtained. These documents may be 
inspected at the Minerals Management Service, 381 Elden Street, Room 
3313, Herndon, Virginia, or at the Office of the Federal Register, 800 
North Capitol Street, NW., suite 700, Washington, DC. In order to 
facilitate correlation of the text of the corresponding sections with 
the list of documents incorporated by reference, the documents are 
listed in alphanumerical order.

    (a) American Concrete Institute (ACI) Document. The ACI document 
listed in this paragraph may be purchased from the American Concrete 
Institute, P.O. Box 19150, Detroit, Michigan 48219.

    (1) American Concrete Institute (ACI) Standard 318-95, Building Code 
Requirements for Reinforced Concrete, plus Commentary on Building Code 
Requirements for Reinforced Concrete (ACI 318R-95), Incorporated by 
Reference at: Sec. 250.138 (b)(4)(i), (b)(6)(i), (b)(7), (b)(8)(i), 
(b)(9), (b)(10), (c)(3), (d)(1)(v), (d)(5), (d)(6), (d)(7), (d)(8), 
(d)(9), (e)(1)(i), and (e)(2)(i).
    (2) ACI Standard 357-R-84, Guide for the Design and Construction of 
Fixed Offshore Concrete Structures, 1984, Incorporated by Reference at: 
Secs. 250.130(g) and 250.138 (c)(2) and (c)(3).

    (b) American Institute of Steel Construction (AISC) Document. The 
AISC document listed in this paragraph may be purchased from the 
American Institute of Steel Construction, Inc., P.O. Box 4588, Chicago, 
Illinois 60680.

    (1) AISC Standard Specification for Structural Steel Buildings, 
Allowable Stress Design and Plastic Design, June 1, 1989, with 
Commentary, Incorporated by Reference at: Sec. 250.137 (b)(1)(ii), 
(c)(4)(iii), and (c)(4)(vii).
    (2) [Reserved]

    (c) American National Standards Institute/American Society of 
Mechanical Engineers (ANSI/ASME) Documents. The ANSI/ASME documents 
listed in this paragraph may be purchased from the American National 
Standards Institute, Attention Sales Department, 1430 Broadway, New 
York, New York 10018, and from the American Society of Mechanical 
Engineers, United Engineering Center, 345 East 47th Street, New York, 
New York 10017.


[[Page 216]]


    (1) The American National Standards Institute/American Society of 
Mechanical Engineers (ANSI/ASME) Boiler and Pressure Vessel Code, 
Section I, Power Boilers including Appendices, 1995 Edition, 
incorporated by Reference at: Secs. 250.123 (b)(1) and (b)(1)(i) and 
250.292 (b)(1) and (b)(1)(i).
    (2) The ANSI/ASME Boiler and Pressure Vessel Code, Section IV, 
Heating Boilers, including Nonmandatory Appendices A, B, C, D, E, F, H, 
I, and J and the Guide to Manufacturers Data Report Forms, 1995 Edition, 
Incorporated by Reference at: Secs. 250.123 (b)(1) and (b)(1)(i) and 
250.292 (b)(1) and (b)(1)(i).
    (3) ANSI/ASME Boiler and Pressure Vessel Code, Section VIII, 
Pressure Vessels, Divisions 1 and 2, including Nonmandatory Appendices, 
1995 Edition, Incorporated by Reference at: Secs. 250.123 (b)(1) and 
(b)(1)(i) and 250.292 (b)(1) and (b)(1)(i).
    (4) ANSI/ASME B 31.8-1995, Gas Transmission and Distribution Piping 
Systems, Incorporated by Reference at: Sec. 250.152(a).
    (5) ASME/ANSI SPPE-1-1988 and SPPE-1a-1988, SPPE-1b-1989, SPPE-1c-
1989, and SPPE-1d-1990 (addenda), Quality Assurance and Certification of 
Safety and Pollution Prevention Equipment Used in Offshore Oil and Gas 
Operations, Incoporated by Reference at Sec. 250.126 paragraphs (c)(2), 
(e)(1), and (e)(3).
    (6) ANSI/ASME B 16.5-1988 (including Errata) and B 16.5a-1992 
Addenda, Pipe Flanges and Flanged Fittings, Incorporated by Reference 
at: Sec. 250.152(b)(2).
    (7) ANSI Z88.2-1992, American National Standard for Respiratory 
Protection, Incorporated by Reference at: Secs. 250.67(g)(4)(iv) and 
(j)(13)(ii).

    (d) American Petroleum Institute (API) Documents. The API documents 
listed in this paragraph may be purchased from the American Petroleum 
Institute, 1220 L Street, NW., Washington, D.C. 20005. (Paragraphs 
(d)(21) through (d)(61) of this section refer to the API Manual of 
Petroleum Measurement Standards (MPMS).
    (1) API Spec Q1, Specification for Quality Programs, Third Edition, 
June 1990, API Stock No. 811-00001, Incorporated by Reference at: 
Sec. 250.126(c)(3).
    (2) API RP 2A, Recommended Practice for Planning, Designing and 
Constructing Fixed Offshore Platforms Working Stress Design, Nineteenth 
Edition, August 1, 1991, API Stock No. 811-00200, Incorporated by 
Reference at: Secs. 250.130(g) and 250.142(a).
    (3) API RP 2D, Recommended Practice for Operation and Maintenance of 
Offshore Cranes, Third Edition, June 1, 1995, API Stock No. G02D03, 
Incorporated by Reference at: Secs. 250.20(c) and 250.260(g).
    (4) API Spec 6A, Specification for Wellhead and Christmas Tree 
Equipment, Seventeenth Edition, February 1, 1996, API Stock No. G06A17, 
Incorporated by Reference at: Secs. 250.126(c)(3), (e)(2), and (e)(3) 
and 250.152 (b)(1) and (b)(2).
    (5) API Spec 6AV1, Specification for Verification Test of Wellhead 
Surface Safety Valves and Underwater Safety Valves for Offshore Service, 
First Edition, February 1, 1996, API Stock No. G06AV1, Incorporated by 
Reference at: Sec. 250.126(c)(3).
    (6) API Spec 6D, Specification for Pipeline Valves (Gate, Plug, 
Ball, and Check Valves), Twenty-first Edition, March 31, 1994, API Stock 
No. G03200, Incorporated by Reference at: Sec. 250.152(b)(1).
    (7) API Spec 14A, Specification for Subsurface Safety Valve 
Equipment, Ninth Edition, July 1, 1994, API Stock No. G14A09, 
Incorporated by Reference at: Sec. 250.126 (c)(3), (e)(2), and (e)(3).
    (8) API RP 14B, Design, Installation, Repair and Operation of 
Subsurface Safety Valve Systems, Fourth Edition, July 1, 1994, with 
Errata dated June, 1996, API Stock No. G14B04, Incorporated by Reference 
at: Secs. 250.121(e)(4), 250.124(a)(1)(i), and 250.126(d).
    (9) API RP 14C, Recommended Practice for Analysis, Design, 
Installation and Testing of Basic Surface Safety Systems for Offshore 
Production Platforms, Fourth Edition, September 1, 1986, API Stock No. 
811-07180, Incorporated by References at Secs. 250.122 (b) and (e)(2); 
250.123 (a), (b)(2)(i), (b)(4), (b)(5)(i), (b)(7), (b)(9)(v), and 
(c)(2); 250.124 (a) and (a)(5); 250.152(d); 250.154(b)(9); 250.291 (c) 
and (d)(2); 250.292 (b)(2) and (b)(4)(v); and 250.293(a).
    (10) API Spec 14D, Specification for Wellhead Surface Safety Valves 
and Underwater Safety Valves for Offshore Service, Ninth Edition, June 
1, 1994, with errata dated August 1, 1994, API Stock No. G07183, 
Incorporated by Reference at: Sec. 250.126 (c)(3), (e)(2), and (e)(3).
    (11) API RP 14E, Recommended Practice for Design and Installation of 
Offshore Production Platform Piping Systems, Fifth Edition, October 1, 
1991, API Stock No. G07185, Incorporated by Reference at: 
Secs. 250.122(e)(3) and 250.291 (b)(2) and (d)(3).
    (12) API RP 14F, Recommended Practice for Design and Installation of 
Electrical Systems for Offshore Production Platforms, Third Edition, 
September 1, 1991, API Stock No. G07190, Incorporated by Reference at: 
Secs. 250.53(c), 250.123(b)(9)(v), and 250.292(b)(4)(v).
    (13) API RP 14G, Recommended Practice for Fire Prevention and 
Control on Open Type Offshore Production Platforms, Third Edition, 
December 1, 1993, API Stock No. G07194, Incorporated by Reference at: 
Secs. 250.123 (b)(8) and (b)(9)(v) and 250.292 (b)(3) and (b)(4)(v).
    (14) API RP 14H, Recommended Practice for Installation, Maintenance 
and Repair of Surface Safety Valves and Underwater Safety Valves 
Offshore, Fourth Edition, July 1,

[[Page 217]]

1994, API Stock No. G14H04, Incorporated by Reference at: 
Secs. 250.122(d) and 250.126(d).
    (15) API RP 500, Recommended Practice for Classification of 
Locations for Electrical Installations at Petroleum Facilities, First 
Edition, June 1, 1991, API Stock No. G06005, Incorporated by Reference 
at: Secs. 250.53(b), 250.122(e)(4)(i), 250.123(b)(9)(i), 250.291 (b)(3) 
and (d)(4)(i), and 250.292(b)(4)(i).
    (16) API Standard 2545, Method of Gauging Petroleum and Petroleum 
Products, October 1965, reaffirmed October 1992, also available as ANSI/
American Society of Testing Materials (ASTM) D 1085-65, API Stock No. 
H25450, Incorporated by Reference at: Sec. 250.180(f)(2)(ii)(C).
    (17) API Standard 2551, Standard Method for Measurement and 
Calibration of Horizontal Tanks, First Edition, 1965, reaffirmed October 
1992, also available as ANSI/ASTM D 1410-65, reapproved 1984, API Stock 
No. H25510, Incorporated by Reference at: Sec. 250.180(f)(2)(i)(C).
    (18) API Standard 2552, Measurement and Calibration of Spheres and 
Spheroids, First Edition, 1966, reaffirmed October 1992, also available 
as ANSI/ASTM D 1408-65, reapproved 1984, API Stock No. H25520, 
Incorporated by Reference at: Sec. 250.180(f)(2)(i)(C).
    (19) API Standard 2555, Method for Liquid Calibration of Tanks, 
September 1966, reaffirmed October 1992, also available as ANSI/ASTM D 
1406-65, reapproved 1984, API Stock No. H25550, Incorporated by 
Reference at: Sec. 250.180(f)(2)(i)(C).
    (20) API RP 2556, Correcting Gauge Tables for Incrustation, Second 
Edition, August 1993, API Stock No. H25560, Incorporated by Reference 
at: Sec. 250.180(f)(2)(i)(C).
    (21) Manual of Petroleum Management Standard (MPMS), Chapter 2, Tank 
Calibration, section 2A, Measurement and Calibration of Upright 
Cylindrical Tanks by the Manual Strapping Method, First Edition, 
February 1995, API Stock No. H022A1, Incorporated by Reference at: 
Sec. 250.180(f)(2)(i)(A).
    (22) MPMS, Chapter 2, section 2B, Calibration of Upright Cylindrical 
Tanks Using the Optical Reference Line Method, First Edition, March 
1989, also available as ANSI/ASTM D4738-88, API Stock No. H30023, 
Incorporated by Reference at: Sec. 250.180(f)(2)(i)(B).
    (23) MPMS, Chapter 3, Tank Gauging, section 1A, Standard Practice 
for the Manual Gauging of Petroleum and Petroleum Products, First 
Edition, December 1994, API Stock No. H031A1, Incorporated by Reference 
at: Sec. 250.180(f)(2)(ii)(A).
    (24) MPMS, Chapter 3, section 1B, Standard Practice for Level 
Measurement of Liquid Hydrocarbons in Stationary Tanks by Automatic Tank 
Gauging, First Edition, April 1992, API Stock No. H30060, Incorporated 
by Reference at: Sec. 250.180(f)(2)(ii)(B).
    (25) MPMS, Chapter 4, Proving Systems, section 1, Introduction, 
First Edition, July 1988, reaffirmed October 1993, API Stock No. H30081, 
Incorporated by Reference at: Sec. 250.180 (c)(6)(i) and (d)(3)(iv).
    (26) MPMS, Chapter 4, section 2, Conventional Pipe Provers, First 
Edition, October 1988, reaffirmed October 1993, API Stock No. H30082, 
Incorporated by Reference at: Sec. 250.180 (c)(6)(i) and (d)(3)(iv).
    (27) MPMS, Chapter 4, section 3, Small Volume Provers, First 
Edition, July 1988, reaffirmed October 1993, API Stock No. H30083, 
Incorporated by Reference at: Sec. 250.180 (c)(6)(i) and (d)(3)(iv).
    (28) MPMS, Chapter 4, section 4, Tank Provers, First Edition, 
October 1988, reaffirmed October 1993, API Stock No. H30084, 
Incorporated by Reference at: Sec. 250.180 (c)(6)(i) and (d)(3)(iv).
    (29) MPMS, Chapter 4, section 5, Master-Meter Provers, First 
Edition, October 1988, reaffirmed October 1993, API Stock No. H30085, 
Incorporated by Reference at: Sec. 250.180 (c)(6)(i) and (d)(3)(iv).
    (30) MPMS, Chapter 4, section 6, Pulse Interpolation, First Edition, 
July 1988, reaffirmed October 1993, API Stock No. H30086, Incorporated 
by Reference at: Sec. 250.180 (c)(6)(i) and (d)(3)(iv).
    (31) MPMS, Chapter 4, section 7, Field-Standard Test Measures, First 
Edition, October 1988, API Stock No. H30087, Incorporated by Reference 
at: Sec. 250.180 (c)(6)(i) and (d)(3)(iv).
    (32) MPMS, Chapter 5, Metering, section 1, General Considerations 
for Measurement by Meters, Third Edition, September 1995, API Stock No. 
H05013, Incorporated by Reference at: Sec. 250.180(c)(6)(ii).
    (33) MPMS, Chapter 5, section 2, Measurement of Liquid Hydrocarbons 
by Displacement Meters, Second Edition, November 1987, reaffirmed 
October 1992, API Stock No. H30102, Incorporated by Reference at: 
Sec. 250.180(c)(6)(ii).
    (34) MPMS, Chapter 5, section 3, Measurement of Liquid Hydrocarbons 
by Turbine Meters, Third Edition, September 1995, API Stock No. H05033, 
Incorporated by Reference at: Sec. 250.180(c)(6)(ii).
    (35) MPMS, Chapter 5, section 4, Accessory Equipment for Liquid 
Meters, Third Edition, September 1995, with Errata, March, 1996, API 
Stock No. H05043, Incorporated by Reference at: Sec. 250.180(c)(6)(ii).
    (36) MPMS, Chapter 5, section 5, Fidelity and Security of Flow 
Measurement Pulsed-Data Transmission Systems, First Edition, June 1982, 
reaffirmed October 1992, API Stock No. H30105, Incorporated by Reference 
at: Sec. 250.180(c)(6)(ii).
    (37) MPMS, Chapter 6, Metering Assemblies, section 1, Lease 
Automatic Custody Transfer (LACT) Systems, Second Edition, May 1991, API 
Stock No. H30121, Incorporated by Reference at: 
Sec. 250.180(c)(6)(iii)(A).
    (38) MPMS, Chapter 6, section 6, Pipeline Metering Systems, Second 
Edition, May 1991,

[[Page 218]]

API Stock No. H30126, Incorporated by Reference at: 
Sec. 250.180(c)(6)(iii)(B).
    (39) MPMS, Chapter 6, section 7, Metering Viscous Hydrocarbons, 
Second Edition, May 1991, API Stock No. H30127, Incorporated by 
Reference at: Sec. 250.180(c)(6)(iii)(C).
    (40) MPMS, Chapter 7, Temperature Determination, section 2, Dynamic 
Temperature Determination, Second Edition, March 1995, API Stock No. 
H07022, Incorporated by Reference at: Sec. 250.180 (c)(6)(iv)(A) and 
(f)(2)(iii)(A).
    (41) MPMS, Chapter 7, section 3, Static Temperature Determination 
Using Portable Electronic Thermometers, First Edition, July 1985, 
reaffirmed March 1990, API Stock No. H30143, Incorporated by Reference 
at: Sec. 250.180 (c)(6)(iv)(B) and (f)(2)(iii)(B).
    (42) MPMS, Chapter 8, Sampling, section 1, Standard Practice for 
Manual Sampling of Petroleum and Petroleum Products, Third Edition, 
October, 1995, also available as ANSI/ASTM D 4057-88, API Stock No. 
H30161, Incorporated by Reference at: Sec. 250.180 (c)(6)(v) and 
(f)(2)(iv).
    (43) MPMS, Chapter 8, section 2, Standard Practice for Automatic 
Sampling of Liquid Petroleum and Petroleum Products, Second Edition, 
October 1995, also available as ANSI/ASTM D 4177, API Stock No. H30162, 
Incorporated by Reference at: Sec. 250.180 (c)(6)(v) and (f)(2)(iv).
    (44) MPMS, Chapter 9, Density Determination, section 1, Hydrometer 
Test Method for Density, Relative Density (Specific Gravity), or API 
Gravity of Crude Petroleum and Liquid Petroleum Products, First Edition, 
June 1981, reaffirmed October 1992, also available as ANSI/ASTM D 1298, 
API Stock No. H30181, Incorporated by Reference at: Sec. 250.180 
(c)(6)(vi)(A) and (f)(2)(v)(A).
    (45) MPMS, Chapter 9, section 2, Pressure Hydrometer Test Method for 
Density or Relative Density, First Edition, April 1982, reaffirmed 
October 1992, API Stock No. H30182, Incorporated by Reference at: 
Sec. 250.180 (c)(6)(vi)(B) and (f)(2)(v)(B).
    (46) MPMS, Chapter 10, Sediment and Water, section 1, Determination 
of Sediment in Crude Oils and Fuel Oils by the Extraction Method, First 
Edition, April 1981, reaffirmed December 1993, also available as ANSI/
ASTM D 473, API Stock No. H30201, Incorporated by Reference at: 
Sec. 250.180 (c)(6)(vii)(A) and (f)(2)(vi)(A).
    (47) MPMS, Chapter 10, section 2, Determination of Water in Crude 
Oil by Distillation Method, First Edition, April 1981, reaffirmed 
December 1993, also available as ANSI/ASTM D 4006, API Stock No. H30202, 
Incorporated by Reference at: Sec. 250.180 (c)(6)(vii)(B) and 
(f)(2)(vi)(B).
    (48) MPMS, Chapter 10, section 3, Determination of Water and 
Sediment in Crude Oil by the Centrifuge Method (Laboratory Procedure), 
First Edition, April 1981, reaffirmed December 1993, also available as 
ANSI/ASTM D 4007, API Stock No. H30203, Incorporated by Reference at: 
Sec. 250.180 (c)(6)(vii)(C) and (f)(2)(vi)(C).
    (49) MPMS, Chapter 10, section 4, Determination of Sediment and 
Water in Crude Oil by the Centrifuge Method (Field Procedure), Second 
Edition, May 1988, also available as ANSI/ASTM D 96, API Stock No. 
H30204, Incorporated by Reference at: Sec. 250.180 (c)(6)(vii)(D) and 
(f)(2)(vi)(D).
    (50) MPMS, Chapter 11.1, Volume Correction Factors, Volume 1, Table 
5A--Generalized Crude Oils and JP-4 Correction of Observed API Gravity 
to API Gravity at 60  deg.F, and Table 6A--Generalized Crude Oils and 
JP-4 Correction of Observed API Gravity to API Gravity at 60  deg.F, 
First Edition, August 1980, reaffirmed October 1993, also available as 
ANSI/ASTM D 1250, API Stock No. H27000, Incorporated by Reference at: 
Sec. 250.180 (c)(6)(viii)(A), (d)(3)(v)(B), and (f)(2)(vii).
    (51) MPMS, Chapter 11.2.1, Compressibility Factors for Hydrocarbons: 
0-90 deg. API Gravity Range, First Edition, August 1984, reaffirmed May, 
1996, API Stock No. H27300, Incorporated by Reference at: 
Sec. 250.180(c)(6)(viii)(B).
    (52) MPMS, Chapter 11.2.2, Compressibility Factors for Hydrocarbons: 
0.350-0.637 Relative Density (60  deg.F/60  deg.F) and -50  deg.F to 140 
 deg.F Metering Temperature, Second Edition, October 1986, reaffirmed 
October 1992, also available as Gas Processors Association (GPA) 8286-
86, API Stock No. H27307, Incorporated by Reference at: 
Sec. 250.180(c)(6)(viii)(C).
    (53) MPMS, Chapter 11, Physical Properties Data, Addendum to section 
2.2, Compressibility Factors for Hydrocarbons, Correlation of Vapor 
Pressure for Commercial Natural Gas Liquids, First Edition, December 
1994, also available as GPA TP-15, API Stock No. H27308, Incorporated by 
Reference at: Sec. 250.180(c)(6)(viii)(D).
    (54) MPMS, Chapter 11.2.3, Water Calibration of Volumetric Provers, 
First Edition, August 1984, reaffirmed, May 1996, API Stock No. H27310, 
Incorporated by Reference at: Sec. 250.180(d)(3)(iv).
    (55) MPMS, Chapter 12, Calculation of Petroleum Quantities, section 
2, Calculation of Petroleum Quantities Using Dynamic Measurement Methods 
and Volumetric Correction Factors, Including Parts 1 and 2, Second 
Edition, May 1995, also available as ANSI/API MPMS 12.2-1981, API Stock 
No. H30302, Incorporated by Reference at: Sec. 250.180 (c)(6)(ix), 
(d)(3)(v)(A), and (d)(3)(v)(C).
    (56) MPMS, Chapter 14, Natural Gas Fluids Measurement, section 3, 
Concentric Square-Edged Orifice Meters, part 1, General Equations and 
Uncertainty Guidelines, Third Edition, September 1990, also available as 
ANSI/API 2530, Part 1, 1991, API Stock No. H30350, Incorporated by 
Reference at: Sec. 250.181(c)(1).
    (57) MPMS, Chapter 14, section 3, part 2, Specification and 
Installation Requirements,

[[Page 219]]

Third Edition, February 1991, also available as ANSI/API 2530, Part 2, 
1991, API Stock No. H30351, Incorporated by Reference at: 
Sec. 250.181(c)(1).
    (58) MPMS, Chapter 14, section 3, part 3, Natural Gas Applications, 
Third Edition, August 1992, also available as ANSI/API 2530, Part 3, API 
Stock No. H30353, Incorporated by Reference at: Sec. 250.181(c)(1).
    (59) MPMS, Chapter 14, section 5, Calculation of Gross Heating 
Value, Relative Density, and Compressibility Factor for Natural Gas 
Mixtures From Compositional Analysis, Revised, 1996, also available as 
ANSI/API MPMS 24.5-1981, order from Gas Processors Association, 6526 
East 60th Street, Tulsa, Oklahoma 74145, Incorporated by Reference at: 
Sec. 250.181(c)(1).
    (60) MPMS, Chapter 14, section 6, Continuous Density Measurement, 
Second Edition, April 1991, API Stock No. H30346, Incorporated by 
Reference at: Sec. 250.181(c)(1).
    (61) MPMS, Chapter 14, section 8, Liquefield Petroleum Gas 
Measurement, First Edition, February 1983, reaffirmed May 1996, API 
Stock No. H30348, Incorporated by Reference at: Sec. 250.181(c)(1).

    (e) American Society for Testing and Materials (ASTM) Documents. The 
ASTM documents listed below may be purchased from the American Society 
for Testing and Materials, 1916 Race Street, Philadelphia, Pennsylvania 
19103.

    (1) ASTM Standard C33-93, Standard Specification for Concrete 
Aggregates including Nonmandatory Appendix, Incorporated by Reference at 
Sec. 250.138(b)(4)(i).
    (2) ASTM Standard C94-96, Standard Specification for Ready-Mixed 
Concrete, Incorporated by Reference at Sec. 250.138(e)(2)(i).
    (3) ASTM Standard C150-95a, Standard Specification for Portland 
Cement, Incorporated by Reference at Sec. 250.138(b)(2)(i).
    (4) ASTM Standard C330-89, Standard Specification for Light weight 
Aggregates for Structural Concrete, Incorporated by Reference at 
Sec. 250.138(b)(4)(i).
    (5) ASTM Standard C595-94, Standard Specification for Blended 
Hydraulic Cements, Incorporated by Reference at Sec. 250.138(b)(2)(i).

    (f) American Welding Society (AWS) Documents. The AWS documents 
listed in this paragraph may be purchased from the American Welding 
Society, 550 NW. LeJeune Road, P.O. Box 351040, Miami, Florida 33135.

    (1) D1.1-96, Structural Welding Code--Steel, 1996, including 
Commentary, Incorporated by Reference at: Sec. 250.137(b)(1)(i).
    (2) D1.4-79, Structural Welding Code--Reinforcing Steel, 1979, 
Incorporated by Reference at: Sec. 250.138(e)(3)(ii).

    (g) National Association of Corrosion Engineers (NACE) Documents. 
The NACE documents listed in this paragraph may be purchased from the 
National Association of Corrosion Engineers, P.O. Box 218340, Houston, 
Texas 77218.

    (1) NACE Standard MR.01-75-96, Sulfide Stress Cracking Resistant 
Metallic Materials for Oil Field Equipment, January 1996, Incorporated 
by Reference at: Sec. 250.67(p)(2).
    (2) NACE Standard RP 0176-94, Standard Recommended Practice, 
Corrosion Control of Steel Fixed Offshore Platforms Associated with 
Petroleum Production, Incorporated by Reference at Sec. 250.137(d).

[53 FR 10690, Apr. 1, 1988, as amended at 55 FR 10617, Mar. 22, 1990; 55 
FR 37710, Sept. 13, 1990; 55 FR 47752, Nov. 15, 1990; 55 FR 51415, Dec. 
14, 1990; 56 FR 32098, July 15, 1991; 61 FR 60022, Nov. 26, 1996; 62 FR 
3795, Jan. 27, 1997; 62 FR 33156, June 18, 1997]



Sec. 250.2  Definitions.

    Terms used in this part shall have the meanings given in the Act and 
as defined below:
    Act means the OCS Lands Act, as amended (43 U.S.C. 1331 et seq.).
    Affected State means, with respect to any program, plan, lease sale, 
or other activity proposed, conducted, or approved pursuant to the 
provisions of the Act, any State:
    (1) The laws of which are declared, pursuant to section 4(a)(2) of 
the Act, to be the law of the United States for the portion of the OCS 
on which such activity is, or is proposed to be, conducted;
    (2) Which is, or is proposed to be, directly connected by 
transportation facilities to any artificial island or installation or 
other device permanently or temporarily attached to the seabed;
    (3) Which is receiving, or in accordance with the proposed activity 
will receive, oil for processing, refining, or transshipment which was 
extracted from the OCS and transported directly to such State by means 
of vessels or by a combination of means including vessels;
    (4) Which is designated by the Secretary of the Interior (Secretary) 
as a State in which there is a substantial probability of significant 
impact on or damage to the coastal, marine, or human environment, or a 
State in which there will be significant changes

[[Page 220]]

in the social, governmental, or economic infrastructure, resulting from 
the exploration, development, and production of oil and gas anywhere on 
the OCS; or
    (5) In which the Secretary finds that because of such activity there 
is, or will be, a significant risk of serious damage, due to factors 
such as prevailing winds and currents to the marine or coastal 
environment in the event of any oil spill, blowout, or release of oil or 
gas from vessels, pipelines, or other transshipment facilities.
    Air pollutant means any airborne agent or combination of agents for 
which the Environmental Protection Agency (EPA) has established, 
pursuant to section 109 of the Clean Air Act, national primary or 
secondary ambient air quality standards.
    Analyzed geological information means data collected under a permit 
or a lease which have been analyzed. Analysis may include, but is not 
limited to, identification of lithologic and fossil content, core 
analysis, laboratory analysis of physical and chemical properties, well 
logs or charts, results from formation fluid tests, and descriptions of 
hydrocarbon occurrences or hazardous conditions.
    Archaeological resource means any material remains of human life or 
activities that are at least 50 years of age and that are of 
archaeological interest.
    Attainment area means, for any air pollutant, an area which is shown 
by monitored data or which is calculated by air quality modeling (or 
other methods determined by the Administrator of EPA to be reliable) not 
to exceed any primary or secondary ambient air quality standards 
established by EPA.
    Best available control technology (BACT) means an emission 
limitation based on the maximum degree of reduction for each air 
pollutant subject to regulation, taking into account energy, 
environmental and economic impacts, and other costs. The BACT shall be 
verified on a case-by-case basis by the Regional Supervisor and may 
include reductions achieved through the application of processes, 
systems, and techniques for the control of each air pollutant.
    Coastal environment means the physical, atmospheric, and biological 
components, conditions, and factors which interactively determine the 
productivity, state, condition, and quality of the terrestrial ecosystem 
from the shoreline inward to the boundaries of the coastal zone.
    Coastal zone means the coastal waters (including the lands therein 
and thereunder) and the adjacent shorelands (including the waters 
therein and thereunder) strongly influenced by each other and in 
proximity to the shorelands of the several coastal States. The coastal 
zone includes islands, transition and intertidal areas, salt marshes, 
wetlands, and beaches. The coastal zone extends seaward to the outer 
limit of the U.S. territorial sea and extends inland from the shorelines 
to the extent necessary to control shorelands, the uses of which have a 
direct and significant impact on the coastal waters, and the inward 
boundaries of which may be identified by the several coastal States, 
pursuant to the authority in section 305(b)(1) of the Coastal Zone 
Management Act (CZMA) of 1972.
    Competitive reservoir means a reservoir in which there are one or 
more well completions on each of two or more leases from which the 
lessees plan future production.
    Correlative rights when used with respect to lessees of adjacent 
tracts, means the right of each lessee to be afforded an equal 
opportunity to explore for, develop, and produce, without waste, 
minerals from a common source.
    Data means facts and statistics or samples which have not been 
analyzed or processed.
    Development means those activities which take place following 
discovery of minerals in paying quantities, including geophysical 
activity, drilling, platform construction, and operation of all onshore 
support facilities, and which are for the purpose of ultimately 
producing the minerals discovered.
    Director means the Director of MMS of the U.S. Department of the 
Interior.
    District Supervisor means the MMS officer with authority and 
responsibility for a district within an MMS Region.
    Eastern Gulf of Mexico means all OCS areas in the Gulf of Mexico 
deemed by the Director to be adjacent to the State of Florida.

[[Page 221]]

    Emission offsets means emission reductions obtained from facilities, 
either onshore or offshore, other than the facility or facilities 
covered by the proposed Exploration Plan or Development and Production 
Plan.
    Enhanced recovery operations means pressure maintenance operations, 
secondary and tertiary recovery, cycling, and similar recovery 
operations which alter the natural forces in a reservoir to increase the 
ultimate recovery of oil or gas.
    Existing facility as used in Sec. 250.45 is an OCS facility 
described in an Exploration Plan or a Development and Production Plan 
submitted or approved prior to June 2, 1980.
    Exploration means the process of searching for minerals, including:
    (1) Geophysical surveys where magnetic, gravity, seismic, or other 
systems are used to detect or imply the presence of such minerals;
    (2) Any drilling, whether on or off known geological structures, 
including the drilling of a well in which a discovery of oil or natural 
gas in paying quantities is made and the drilling of any additional 
delineation well after such discovery that is needed to delineate any 
reservoir and to enable the lessee to determine whether to proceed with 
development and production; and
    (3) Any drilling for sulphur, including the drilling of a well that 
indicates a sulphur deposit is present and the drilling of additional 
delineation wells needed to outline the sulphur deposit and enable the 
lessee to determine whether to proceed with development and production 
operations.
    Facility as used in Sec. 250.45 concerning air quality means any 
installation or device permanently or temporarily attached to the seabed 
which is used for exploration, development, and production activities 
for oil, gas, or sulphur and which emits or has the potential to emit 
any air pollutant from one or more sources. All equipment directly 
associated with the installation or device shall be considered part of a 
single facility if the equipment is dependent on, or affects the 
processes of, the installation or device. During production, multiple 
installations or devices will be considered to be a single facility if 
the installations or devices are directly related to the production of 
oil or gas at a single site. Any vessel used to transfer production from 
an offshore facility shall be considered part of the facility while 
physically attached to it.
    Facility as used in Sec. 250.67(b) concerning hydrogen sulfide 
(H2S) means a vessel, a structure, or an artificial island 
used for drilling, well-completion, well-workover, and/or production 
operations.
    Gas reservoir means a reservoir that contains hydrocarbons 
predominantly in a gaseous (single-phase) state.
    Gas-well completion means a well completed in a gas reservoir or in 
the gas-cap of an oil reservoir with an associated gas cap.
    Governor means the Governor of a State, or the person or entity 
designated by, or pursuant to, State law to exercise the powers granted 
to such Governor pursuant to the Act.
    Human environment means the physical, social, and economic 
components, conditions, and factors which interactively determine the 
state, condition, and quality of living conditions, employment, and 
health of those affected, directly or indirectly, by activities 
occurring on the OCS.
    Information when used without a qualifying adjective, includes 
analyzed geological information, processed geological information, 
processed geophysical information, interpreted geological information, 
and interpreted geophysical information.
    Interpreted geological information means knowledge, often in the 
form of schematic cross sections and maps, developed by determining the 
geological significance of data and analyzed geological information.
    Interpreted geophysical information means knowledge, often in the 
form of schematic cross sections and maps, developed by determining the 
geological significance of geophysical data and processed geophysical 
information.
    Lease means any form of authorization which is issued under section 
8 or maintained under section 6 of the Act and which authorizes 
exploration for, and development and production of, minerals or the area 
covered by that authorization, whichever is required by the context.

[[Page 222]]

    Lease term pipelines are those pipelines owned and operated by a 
lessee or operator and are wholly contained within the boundaries of a 
single lease, unitized leases, or contiguous (not cornering) leases of 
that lessee or operator.
    Lessee means the party authorized by a lease, or an approved 
assignment thereof, to explore for and develop and produce the leased 
deposits in accordance with the regulations in this part.
    Major Federal action means any action or proposal by the Secretary 
which is subject to the provisions of section 102(2)(C) of the National 
Environmental Policy Act of 1969 (i.e., an action which will have a 
significant impact on the quality of the human environment requiring 
preparation of an Environmental Impact Statement pursuant to section 
102(2)(C) of the National Environmental Policy Act).
    Marine environment means the physical, atmospheric, and biological 
components, conditions, and factors which interactively determine the 
productivity, state, condition, and quality of the marine ecosystem, 
including the waters of the high seas, the contiguous zone, transitional 
and intertidal areas, salt marshes, and wetlands within the coastal zone 
and on the OCS.
    Material remains means physical evidence of human habitation, 
occupation, use, or activity, including the site, location, or context 
in which such evidence is situated.
    Maximum efficient rate (MER) means the maximum sustainable daily oil 
or gas withdrawal rate from a reservoir which will permit economic 
development and depletion of that reservoir without detriment to 
ultimate recovery.
    Maximum production rate means the approved maximum daily rate at 
which oil or gas may be produced from a specified oil-well or gas-well 
completion.
    Minerals includes oil, gas, sulphur, geopressured-geothermal and 
associated resources, and all other minerals which are authorized by an 
act of Congress to be produced from ``public lands'' as defined in 
section 103 of the Federal Land Policy and Management Act of 1976.
    Nonattainment area means, for any air pollutant, an area which is 
shown by monitored data or which is calculated by air quality modeling 
(or other methods determined by the Administrator of EPA to be reliable) 
to exceed any primary or secondary ambient air quality standard 
established by EPA.
    Nonsensitive reservoir means a reservoir in which ultimate recovery 
is not decreased by high reservoir production rates.
    Of archaeological interest means capable of providing scientific or 
humanistic understanding of past human behavior, cultural adaptation, 
and related topics through the application of scientific or scholarly 
techniques, such as controlled observation, contextual measurement, 
controlled collection, analysis, interpretation, and explanation.
    Oil reservoir means a reservoir that contains hydrocarbons 
predominantly in a liquid (single-phase) state.
    Oil reservoir with an associated gas cap means a reservoir that 
contains hydrocarbons in both a liquid and gaseous (two-phase) state.
    Oil-well completion means a well completed in an oil reservoir or in 
the oil accumulation of an oil reservoir with an associated gas cap.
    Operator means the individual, partnership, firm, or corporation 
having control or management of operations on the leased area or a 
portion thereof. The operator may be a lessee, designated agent of the 
lessees, or holder of operating rights under an approved operating 
agreement.
    Outer Continental Shelf (OCS) means all submerged lands lying 
seaward and outside of the area of lands beneath navigable waters as 
defined in section 2 of the Submerged Lands Act (43 U.S.C. 1301) and of 
which the subsoil and seabed appertain to the United States and are 
subject to its jurisdiction and control.
    Person includes, in addition to a natural person, an association, a 
State, a political subdivision of a State, or a private, public, or 
municipal corporation.
    Pipelines are the piping, risers, and appurtenances installed for 
the purpose of transporting oil, gas, sulphur, and produced waters.
    Processed geological information means data collected under a permit 
or a lease

[[Page 223]]

which have been processed. Processing involves changing the form of data 
so as to facilitate interpretation. Processing operations may include, 
but are not limited to, applying corrections for known perturbing 
causes, rearranging or filtering data, and combining or transforming 
data elements.
    Production means those activities which take place after the 
successful completion of any means for the removal of minerals, 
including such removal, field operations, transfer of minerals to shore, 
operation monitoring, maintenance, and work-over operations.
    Projected emissions means emissions, either controlled or 
uncontrolled, from a source or sources.
    Right-of-way pipelines are those pipelines which: (1) Are contained 
within the boundaries of a single lease or unitized leases but are not 
owned and operated by a lessee or operator of that lease or unit, (2) 
are contained within the boundaries of contiguous (not cornering) leases 
which do not have a common lessee or operator, (3) are contained within 
the boundaries of contiguous (not cornering) leases which have a common 
lessee or operator but are not owned and operated by that common lessee 
or operator, or (4) are contained within a block(s) which is unleased.
    Regional Director means the MMS officer with responsibility and 
authority for a Region within MMS.
    Regional Supervisor means the MMS officer with responsibility and 
authority for operations or other designated program functions within an 
MMS Region.
    Routine operations means for the purposes of subpart F, any of the 
following operations conducted on a well with the tree installed: (1) 
cutting paraffin; (2) removing and setting pump-through-type tubing 
plugs, gas-lift valves, and subsurface safety valves which can be 
removed by wireline operations; (3) bailing sand; (4) pressure surveys; 
(5) swabbing; (6) scale or corrosion treatment; (7) caliper and gauge 
surveys; (8) corrosion inhibitor treatment; (9) removing or replacing 
subsurface pumps; (10) through-tubing logging (diagnostics); (11) 
wireline fishing; and (12) setting and retrieving other subsurface flow-
control devices.
    Sensitive reservoir means a reservoir in which ultimate recovery is 
decreased by high reservoir production rates. A high reservoir 
production rate is one which exceeds the MER.
    Significant archaeological resource means those archaeological 
resources that meet the criteria of significance for eligibility to the 
National Register of Historic Places as defined in 36 CFR 60.4.
    Waste of oil, gas, or sulphur means (1) the physical waste of oil, 
gas, or sulphur; (2) the inefficient, excessive, or improper use of, or 
the unnecessary dissipation of reservoir energy; (3) the locating, 
spacing, drilling, equipping, operating, or producing of any oil, gas, 
or sulphur well(s) in a manner which causes or tends to cause a 
reduction in the quantity of oil, gas, or sulphur ultimately recoverable 
under prudent and proper operations or which causes or tends to cause 
unnecessary or excessive surface loss or destruction of oil or gas; or 
(4) the inefficient storage of oil.
    Well-completion operations means the work conducted to establish 
production from a well after the production-casing string has been set, 
cemented, and pressure-tested.
    Well-control fluid means drilling mud, completion fluid, or workover 
fluid as appropriate to the particular operation being conducted.
    Workover operations means the work conducted on wells after the 
initial well-completion operation for the purpose of maintaining or 
restoring the productivity of a well.

[53 FR 10690, Apr. 1, 1988, as amended at 56 FR 32098, July 15, 1991; 59 
FR 53093, Oct. 21, 1994; 62 FR 3795, Jan. 27, 1997]



Sec. 250.3  Performance requirements.

    (a) Nothing in this part shall preclude the use of new or 
alternative techniques, procedures, equipment, or activities other than 
those prescribed in the regulations of this part; if such other 
techniques, procedures, equipment, or activities afford a degree of 
protection, safety, or performance equal to or better than that intended 
to be achieved by the regulations of this part, provided the lessee or 
right-of-way holder obtains the prior written

[[Page 224]]

approval of the District or Regional Supervisor, as appropriate, for the 
use of such new or alternative techniques, procedures, equipment, or 
activities.
    (b) The appropriate MMS official may prescribe or approve departures 
from the operating requirements of the regulations of this part when 
such departures are necessary for the proper control of a well, the 
facilitation of the proper development of a lease, the conservation of 
natural resources, or the protection of life (including fish and other 
aquatic life), property, or the marine, coastal, or human environment.

[53 FR 10690, Apr. 1, 1988, as amended at 54 FR 50616, Dec. 8, 1989]



Sec. 250.4  Jurisdiction.

    (a) Subject to the supervisory authority of the Secretary, drilling 
and production operations, handling, measurement, transportation of 
production, and other operations and activities conducted pursuant to a 
lease or right-of-way by or on behalf of a lessee or right-of-way holder 
are subject to the regulations in this part and are under the 
jurisdiction of the Director.
    (b) In the exercise of that jurisdiction, the Director is authorized 
and directed to act upon the requests, applications, and notices 
submitted under the regulations in this part to issue either written or 
oral orders to govern lease and right-of-way operations and to require 
compliance with applicable laws, regulations, and lease terms so that 
all operations conform to sound conservation practice and are conducted 
in a manner which will preserve, protect, and develop mineral resources 
of the OCS in a manner which is consistent with the following need to:
    (1) Make such resources available to timely meet the Nation's energy 
needs;
    (2) Balance orderly energy resource development with protection of 
the human, marine, and coastal environments;
    (3) Ensure the public a fair and equitable return on the resources 
of the OCS;
    (4) Preserve and maintain free enterprise competition; and
    (5) Minimize or eliminate conflicts between the exploration, 
development, and production of oil and natural gas and the recovery of 
other resources such as fish and shellfish.



Sec. 250.5  Functions.

    The Director, in accordance with the regulations in this part, shall 
accomplish the following:
    (a) Regulate all operations conducted under a lease, right of use 
and easement, or right-of-way to promote orderly exploration, 
development, and production of mineral resources and to prevent 
unreasonable harm or damage to, or waste of, any natural resource 
(including any mineral deposits in areas leased or not leased), any life 
(including fish and other aquatic life), property, or the marine, 
coastal, or human environment.
    (b) Require on all new drilling and production operations and, 
whenever practicable, existing operations, the use of BAST, which the 
Director determines to be economically feasible wherever failure of 
equipment would have a significant effect on safety, health, or the 
environment, except where the Director determines that the incremental 
benefits are clearly insufficient to justify the incremental cost of 
utilizing such technologies.
    (c) Conduct a scheduled onsite inspection at least once a year of 
each offshore facility which is subject to environmental or safety 
regulations promulgated pursuant to the Act. The inspection shall be to 
determine that environmental protection equipment and safety equipment 
designed to prevent or ameliorate blowouts, fires, spillages, or other 
major accidents have been installed and are operating properly in 
accordance with the requirements of this part.
    (d) Conduct periodic onsite inspection without advance notice to the 
operator of such facility as determined necessary to assure compliance 
with applicable regulations.
    (e) Cooperate and consult with or solicit advice from affected 
States, executives of affected local governments, other interested 
parties, and relevant Departments and Agencies of the Federal 
Government.
    (f) Identify for those activities under the jurisdiction of the 
Director those

[[Page 225]]

States which are deemed to be affected States.



Sec. 250.6  Oral approvals.

    (a) The appropriate MMS official may give an oral approval whenever 
the regulations in this part require a lessee or other applicant to 
obtain such official's approval before commencing an operation or 
activity. If an oral approval is given in response to an oral request, 
the lessee or applicant shall confirm the oral request by submitting a 
written request within 72 hours of the oral approval and the MMS 
official shall approve that request subject to any conditions that were 
placed upon the oral approval. In the event a written application is 
given oral approval by an MMS official, the MMS official shall forward 
the approval and any conditions placed theron to the applicant.
    (b) The appropriate MMS official may give oral orders to lessees in 
connection with requirements of this part whenever circumstances do not 
permit the time needed to prepare and issue such orders in writing. Oral 
orders shall be confirmed in writing by the appropriate MMS official.



Sec. 250.7  Right of use and easement.

    (a) In addition to the rights and privileges granted to a lessee 
under a lease issued or maintained under the Act, the Regional 
Supervisor may grant a lessee, subject to conditions prescribed by the 
Regional Supervisor, a right of use and easement on the OCS to construct 
and maintain off the lease platforms, artificial islands, and all 
installations and other devices which are permanently or temporarily 
attached to the seabed and which are used for conducting exploration, 
development, and production activities or other operations on or off the 
lease which are related to such activities. Rights of use and easement 
on the OCS shall be issued and exercised in accordance with the 
provisions of this section.
    (b) A right of use and easement, if on an area subject to any lease 
issued or maintained under the Act, shall be granted only after the 
holder of the lease has been notified by the applicant and afforded an 
opportunity to comment on the application.
    (c) The Regional Supervisor shall require compliance with subpart I 
and MMS approval for all platforms, artificial islands, and 
installations and other devices permanently or temporarily attached to 
the seabed as a condition of the granting of a right of use and easement 
under paragraph (a) of this section or as authorized under any lease 
issued or maintained under the Act.
    (d) The right granted by a right of use and easement shall be 
exercised in accordance with the requirements placed upon lessees by the 
regulations in this part.
    (e) A right of use and easement shall be exercised only in a manner 
which does not interfere unreasonably with operations of any lessee 
under a lease.
    (f) Once a right of use and easement has been exercised, the right 
shall continue, beyond the termination of any lease on which it may be 
situated, as long as it can be demonstrated to the Regional Supervisor 
that the right of use and easement is maintained by the holder of the 
right and serves the purpose specified in the grant. If the right of use 
and easement extends beyond the termination of any lease on which the 
right of use and easement may be situated or on an unleased portion of 
the OCS, the rights of all subsequent lessees shall be subject to such 
right of use and easement.



Sec. 250.8  Designation of operator.

    This section explains the requirement for designation of an operator 
to conduct operations on a lease where the operator is not the sole 
lessee (record title owner) and owner of operating rights.
    (a) Each record title owner (lessee) or operating rights owner for a 
lease must provide the Regional Supervisor a designation of operator in 
each case where someone other than an exclusive record title and 
operating rights owner will conduct lease operations. The designated 
operator must not begin operations on the lease until the Regional 
Supervisor receives the designation of operator.
    (1) This designation of operator is authority for the operator to 
act on behalf of each lessee and operating rights

[[Page 226]]

owner and to fulfill each of their obligations under the Act, the lease, 
and the regulations in this part.
    (2) You must immediately notify the Regional Supervisor in writing 
if you terminate the designation of operator.
    (3) If you terminate a designation of operator or a controversy 
develops between you and your designated operator, you and the operator 
must protect the lessor's interests.
    (4) You or the lease operator must immediately notify the Regional 
Supervisor in writing of any change of address.
    (b) Lessees and operating rights owners are jointly and severally 
responsible for performing nonmonetary lease obligations, unless 
otherwise provided in the regulations in this chapter. If the designated 
operator fails to perform any obligation under the lease or the 
regulations in this chapter, the Regional Director may require any or 
all of the co-lessees and operating rights owners to bring the lease 
into compliance.

[62 FR 27954, May 22, 1997]

    Effective Date Note: At 62 FR 27954, May 22, 1997, Sec. 250.8 was 
revised, effective Aug. 20, 1997. For the convenience of the user, the 
superseded text is set forth as follows:

Sec. 250.8  Designation of operator.

    In all cases where operations are not conducted by an exclusive 
owner of record, a designation of operator shall be submitted to the 
Regional Supervisor prior to the commencement of operations. This 
designation will be accepted as authority for the operator, or the 
operator's local representative, to act on behalf of the lessee and to 
fulfill the lessee's obligations under the Act and the regulations in 
this part. All changes of address and any termination of the authority 
of the operator shall be reported immediately, in writing, to the 
Regional Supervisor. In case of a termination or in the event of a 
controversy between the lessee and the designated operator, both the 
lessee and the operator will be required to protect the interests of the 
lessor.



Sec. 250.9  Local agent.

    When required by the Regional Supervisor or at the option of the 
lessee, the lessee shall designate a representative empowered to receive 
notices and comply with orders issued pursuant to the regulations in 
this part.



Sec. 250.10  Suspension of production or other operations.

    (a) The Regional Supervisor may, on the Regional Supervisor's 
initiative or at the request of the lessee, suspend or temporarily 
prohibit production or any other operation or activity on all or any 
part of a lease (suspension) when the Regional Supervisor determines 
that such suspension is in the national interest and that the suspension 
is necessary as follows:
    (1) To facilitate proper development of a lease including reasonable 
time to construct production facilities;
    (2) To allow for the construction or negotiation for use of 
transportation facilities;
    (3) To allow reasonable time to enter into a sales contract for oil, 
gas, or sulphur, when good faith efforts to secure such contract(s) are 
being made;
    (4) To allow reasonable time to commence drilling operations when 
good faith efforts are prevented by reasons beyond the lessee's control, 
such as unexpected weather or unavoidable accidents; or
    (5) To avoid continued operations which would result in premature 
abandonment of a producing well(s) or would not be economic.
    (b) The Regional Supervisor may also direct or, at the request of 
the lessee, approve a suspension of any operation or activity, including 
production, because of the following:
    (1) The lessee failed to comply with a provision of any applicable 
law, regulation, or order, or provision of a lease or permit;
    (2) There is a threat of serious, irreparable, or immediate harm or 
damage to life (including fish and other aquatic life), property, any 
mineral deposit, or the marine, coastal, or human environment;
    (3) The suspension is in the interest of national security or 
defense;
    (4) The suspension is necessary for the implementation of the 
requirements of the National Environmental Policy Act or to conduct an 
environmental analysis;
    (5) The suspension is necessary to facilitate the installation of 
equipment necessary for safety and environmental reasons;

[[Page 227]]

    (6) The suspension is necessary to allow for inordinate delays 
encountered by the lessee in obtaining required permits or consents, 
including administrative or judicial challenges or appeals; or
    (7) The suspension is necessary to comply with judicial decrees 
prohibiting production or any other operation or activity, or the 
permitting of those activities, effective the date set by the court for 
that prohibition.
    (c) If provided for by lease stipulation, the Regional Supervisor 
shall suspend or temporarily prohibit production or any other operation 
or activity pursuant to a lease when such lease is in water depths of 
400 to 900 meters, provided that the suspension or temporary prohibition 
shall be for such period of time as is necessary to complete the 
activities described in a Development and Production Plan approved by 
the Regional Supervisor in accordance with Sec. 250.34. However, in no 
case shall the suspension under this paragraph be for periods of time 
which exceed a total of 5 years.
    (d)(1) A suspension of production pursuant to paragraph (a) (1), 
(2), or (3) of this section may not be issued unless a well on the lease 
for which the suspension is requested has been drilled and determined to 
be producible in paying quantities in accordance with Sec. 250.11.
    (2) For sulphur operations, a suspension of production pursuant to 
paragraph (a) (1), (2), or (3) of this section may not be issued unless 
a deposit on the lease for which the suspension is requested has been 
drilled and determined to be producible in paying quantities in 
accordance with 30 CFR 250.253.
    (e) Except as provided in paragraph (c) of this section, suspensions 
under this section may be granted for periods of time each of which 
shall not exceed 5 years.
    (f) When the Regional Supervisor orders or approves a suspension 
pursuant to paragraph (a), (b), or (c) of this section, the term of the 
lease shall be extended for a period of time equal to the period that 
the suspension is in effect, except that no lease shall be so extended 
when the suspension is the result of the lessee's gross negligence or 
willful violation of the lease or governing regulations.
    (g) The Regional Supervisor may, at any time within the period 
prescribed for a suspension issued pursuant to paragraph (b)(2) of this 
section, require the lessee to submit a plan for approval, disapproval, 
or modification in accordance with subpart B, Exploration and 
Development and Production Plans.
    (h)(1) When the Regional Supervisor directs or grants a suspension 
pursuant to paragraph (b)(2) of this section, the Regional Supervisor 
may require the lessee to conduct a site-specific study(s) to identify 
and evaluate the cause(s) of the hazard(s) generating the suspension, 
the potential damage from the hazard(s), and the measures available for 
mitigating the hazard(s). A reasonable scope of the study(s) shall be 
approved or prescribed by the Regional Supervisor. The lessee shall 
furnish copies and all results of the study(s) to the Regional 
Supervisor. The cost of the study(s) shall be borne by the lessee unless 
the Regional Supervisor arranges for the cost of the study(s) to be 
borne by a party(s) other than the lessee. The Regional Supervisor shall 
make such results available to interested parties and to the public.
    (2) On the basis of the results of the study or studies conducted in 
accordance with paragraph (h)(1) of this section and other information 
available to and identified by the Regional Supervisor, the Regional 
Supervisor shall require the lessee to take appropriate measures to 
mitigate or avoid the damage or potential damage, which resulted in the 
suspension or temporary prohibition of production or of any other 
operation or activity, as a condition for permitting the resumption of 
exploration, development, or production activities on the lease. The 
lessee shall submit, when deemed appropriate by the Regional Supervisor, 
a revised Exploration Plan or a revised Development and Production Plan 
in accordance with Sec. 250.34 of this part. The revised plan shall 
incorporate the mitigating measures required by the Regional Supervisor. 
In choosing between alternative mitigating measures, the Regional 
Supervisor will balance the cost of the required measures against

[[Page 228]]

the reduction or potential reduction in damage or threat of damage or 
harm to life (including fish and other aquatic life), to property, to 
any mineral deposits (in areas leased or not leased), to the national 
security or defense, or to the marine, coastal, or human environment.
    (i) The lessee must submit with a request for a suspension of 
production the reasons for requesting the suspension, a schedule of work 
leading to the commencement or restoration of production or any other 
operation or activity, and any other information the Regional Supervisor 
may require.
    (j) Any suspension may be terminated at any time when the Director 
determines that the circumstances which justified the granting of the 
suspension no longer exist. When the Director terminates a suspension 
prior to the end of the period of time for which the suspension was 
originally granted, the Director shall specify in the notice of 
termination the reason(s) for the termination and the effective date for 
the termination of the suspension.
    (k) Any suspension shall terminate automatically upon the 
commencement of production or any other suspended operation or activity.

[53 FR 10690, Apr. 1, 1988 as amended at 56 FR 32099, July 15, 1991]



Sec. 250.11  Determination of well producibility.

    Upon receiving a written request from the lessee, the District 
Supervisor will determine whether a well is capable of producing in 
paying quantities (production of oil, gas, or both in quantities 
sufficient to yield a return in excess of the costs, after completion of 
the well, of producing the hydrocarbons at the wellhead.) Such a 
determination shall be based upon the following:
    (a) A production test for oil wells shall be of at least 2 hours' 
duration following stabilization of flow. A deliverability test for gas 
wells shall be of at least 2 hours' duration following stabilization of 
flow or a four-point back-pressure test. The lessee shall provide the 
District Supervisor a reasonable opportunity to witness all tests. Test 
data accompanied by the lessee's affidavit, or third-party test data, 
may be accepted in lieu of a witnessed test, provided prior approval is 
obtained from the District Supervisor.
    (b) In the Gulf of Mexico OCS Region, the following shall also be 
considered collectively as reliable evidence that a well is capable of 
producing oil or gas in paying quantities:
    (1) A resistivity or induction electric log of the well showing a 
minimum of 15 feet of producible sand in one section that does not 
include any interval which appears to be water-saturated. In some cases, 
wells with less than 15 feet of producible sand in one section may be 
approved by the District Supervisor. All of the section counted as 
producible shall exhibit the following properties:
    (i) Electrical spontaneous potential exceeding 20-negative 
millivolts beyond the shale base line. If mud conditions prevent a 20-
negative millivolt reading beyond the shale base line, a gamma ray log 
deflection of at least 70 percent of the maximum gamma ray deflection in 
the nearest clean water-bearing sand may be substituted.
    (ii) A minimum true resistivity ratio of the producible section to 
the nearest clean water-bearing sand of at least 5:1.
    (2) A log indicating sufficient porosity in the producible section.
    (3) Sidewall cores and core analyses which indicate that the section 
is capable of producing oil or gas or evidence that an attempt was made 
to obtain such cores.
    (4) A wireline formation test and/or mud-logging analysis which 
indicates that the section is capable of producing oil or gas, or 
evidence that an attempt was made to obtain such tests.



Sec. 250.12  Cancellation of leases.

    (a)(1) The Secretary may terminate a suspension and cancel a lease 
as follows after notice and opportunity for a hearing when:
    (i) Continued activity pursuant to the lease or permit would 
probably cause serious harm or damage to life (including fish and other 
aquatic life), property, other mineral deposits (in areas leased or not 
leased), or the marine, coastal, or human environment;

[[Page 229]]

    (ii) The threat of harm or damage will not disappear or decrease to 
an acceptable extent within a reasonable period of time;
    (iii) The advantages of cancellation outweigh the advantages of 
continuing the lease or permit in force; and
    (iv) The suspension has been in effect for at least 5 years, or the 
termination of suspension and lease cancellation are at the request of 
the lessee.
    (2) If a lease is cancelled under this section or under part 256 of 
this title, the lessee shall be entitled to compensation pursuant to the 
provisions of this section.
    (b) Whenever an Exploration Plan is disapproved because the Regional 
Supervisor determines that approval of the activities called for in the 
plan would probably cause serious harm or damage to life (including fish 
and other aquatic life), property, any mineral deposits (in areas leased 
or not leased), the national security or defense, or to the marine, 
coastal, or human environment and the proposed activity cannot be 
modified to avoid these dangers, the Secretary, once the primary lease 
term has been extended continuously for a period of 5 years following 
the disapproval or upon request of the lessee at an earlier time, may 
terminate the suspension or temporary prohibition and cancel the lease, 
and the lessee shall be entitled to compensation pursuant to paragraph 
(f) of this section.
    (c)(1) Where a Development and Production Plan is submitted before 
the subsequent approval of a Coastal Zone Management (CZM) program for 
an affected State, pursuant to the CZMA, and the plan is disapproved by 
the Regional Supervisor pursuant to Sec. 250.34(k)(3)(ii), the following 
may occur:
    (i) The term of the lease shall be duly extended and, at any time 
within 5 years after such disapproval, the lessee may reapply for 
approval of the same or a modified plan, and the Regional Supervisor 
shall approve, disapprove, or require modification of the plan in 
accordance with the provisions in Sec. 250.34.
    (ii) Upon expiration of the 5-year period described in paragraph 
(c)(1)(i) of this section or, at the Secretary's discretion, at an 
earlier time upon request of the lessee, if the Regional Supervisor has 
not approved a plan or required the lessee to submit a Development and 
Production Plan for approval or modification, the Secretary shall cancel 
the lease, and the lessee shall be entitled to compensation pursuant to 
paragraph (f) of this section.
    (d) The lessee shall not be entitled to compensation when a lease 
expires.
    (e) The lessee shall not be entitled to compensation when a lease is 
cancelled where the following circumstances exist:
    (1) A Development and Production Plan submitted after approval of a 
State's CZM program, pursuant to the CZMA, is disapproved because the 
lessee does not receive concurrence by the State pursuant to section 
307(c)(3)(B) (i) or (ii) of the CZMA, and the Secretary of Commerce does 
not make the finding authorized by section 307(c)(3)(B)(iii) of the 
CZMA;
    (2) A lessee fails to submit a Development and Production Plan in 
accordance with Sec. 250.34 or fails to comply with an approved plan;
    (3) The owner of a nonproducing lease fails to comply with a 
provision of the Act, the lease, or the regulations issued under the 
Act, and the default continues for a period of 30 days after the mailing 
of a notice by registered letter to the lessee;
    (4) A Development and Production Plan is disapproved because of a 
failure to demonstrate compliance with the requirements of applicable 
Federal law, or
    (5) A producing lease is forfeited or is cancelled pursuant to 
section (5)(d) of the Act.
    (f) Cancellation of a lease under paragraphs (a), (b), and (c) of 
this section shall entitle the lessee to receive such compensation as 
the lessee shows the Director as being equal to the lesser of the 
following:
    (1) The fair value of the cancelled rights as of the date of 
cancellation, taking into account both anticipated revenues from the 
lease and costs reasonably anticipated on the lease, including costs of 
compliance with all applicable regulations and operating orders and 
liability for cleanup costs or damages, or both, in the case of an oil 
spill; or

[[Page 230]]

    (2) The excess, if any, over the lessee's revenues from the lease 
(plus interest thereon from the date of receipt to date of 
reimbursement) of all consideration paid for the lease and all direct 
expenditures made by the lessee after the date of issuance of the lease 
and in connection with exploration or development, or both, pursuant to 
the lease (plus interest on this consideration and expenditures from 
date of payment to date of reimbursement), except as follows:
    (i) With respect to leases issued before September 18, 1978, 
compensation shall be equal to the amount specified in paragraph (f)(1) 
of this section, and
    (ii) In the case of jointly held leases which are cancelled due to 
the failure of one or more partners to exercise due diligence, innocent 
party(s) shall have the right to seek damages for losses from the 
responsible party(s) and the right to acquire the interests of the 
negligent party(s) and be issued the lease in question.

[53 FR 10690, Apr. 1, 1988, as amended at 54 FR 50616, Dec. 8, 1989]



Sec. 250.13  How Does Production, Drilling, or Well-reworking Affect Your Lease Term?

    (a) Your lease expires at the end of its primary term unless you are 
producing or conducting drilling or well-reworking operations on your 
lease. See Sec. 256.37(b) of this title. Also, any drilling or well-
reworking program must be part of a plan that has as its objective 
continuous production on the lease. For purposes of this section, the 
term ``operations'' means production, drilling, or well-reworking.
    (b) If you stop conducting operations during the last 180 days of 
the primary lease term, your lease will remain in effect beyond the 
primary term only if you:
    (1) Resume operations on the lease no later than 180 days after the 
operations ended; or
    (2) Ask MMS for a suspension of operations or production under 30 
CFR 250.10 before the 180th day after you stop operations, and 
thereafter receive the Regional Supervisor's approval; or
    (3) Receive a directed suspension of operations or production from 
the Regional Supervisor under 30 CFR 250.10 before the 180th day after 
you stop operations.
    (c) If you stop conducting operations on a lease that has continued 
beyond its primary term, then your lease will expire unless you comply 
with either paragraph (b)(1), (b)(2), or (b)(3) of this section.
    (d) You may ask the Regional Supervisor to allow you more than 180 
days to resume operations on a lease continued beyond its primary term 
when operating conditions warrant. The request must be in writing and 
explain the operating conditions that warrant a longer period. In 
allowing additional time, the Regional Supervisor must determine that 
the longer period is in the national interest and that it conserves 
resources, prevents waste, or protects correlative rights.

[61 FR 55887, Oct. 30, 1996; 62 FR 35247, June 30, 1997]



Sec. 250.14  Reinjection and subsurface storage of gas.

    (a)(1) The Regional Supervisor may authorize the reinjection of gas 
on the OCS to promote conservation of natural resources and to prevent 
waste when it can be shown that no undue interference with operations 
under existing leases will result.
    (2) An application for reinjection of gas may be approved for the 
purpose of the following:
    (i) Enhanced recovery projects,
    (ii) Preventing of the flaring of casinghead gas, or
    (iii) Other conservation measures approved by the Regional 
Supervisor.
    (b)(1) The Regional Supervisor may authorize subsurface storage of 
gas on the OCS for later commercial benefit when it can be shown that no 
undue interference with operations under existing leases will result.
    (2) In each case authorized in paragraph (b)(1) of this section, a 
storage agreement will be required, and the authorization for storage 
will provide for the payment of a storage fee or rental.
    (c) Reinjection or storage of gas may be approved for locations on- 
or off-lease, provided that when gas is reinjected or stored off the 
lease or unit from which it was produced, royalties shall be paid at the 
time the gas is first

[[Page 231]]

produced. Gas produced from a reservoir containing both reinjected or 
stored gas and gas original to the reservoir shall be presumed to be 
made up of proportionate amounts of injected or stored gas and gas 
original to the reservoir in accordance with a formula approved or 
prescribed by the Regional Supervisor.
    (d) The use of all or any part of a lease area for subsurface 
storage of gas shall not affect the continuance or expiration of such 
lease.
    (e) Gas may not be stored on unleased lands unless a right of use 
and easement for that purpose has been approved by the Regional 
Supervisor in accordance with Sec. 250.7.
    (f) Reinjection or storage of gas will not be approved when the gas 
is to be injected into the cap rock of a salt dome known to contain a 
sulphur deposit, unless the injection of gas is necessary to the 
recovery of oil and gas contained in the cap rock, and the applicant can 
demonstrate to the satisfaction of the Regional Supervisor that the 
injection of gas will not significantly increase potential hazards to 
present or future sulphur mining operations.

[53 FR 10690, Apr. 1, 1988 as amended at 56 FR 32099, July 15, 1991]



Sec. 250.15  Identification.

    (a) Platforms, structures, artificial islands, and mobile drilling 
units which have helicopter landing facilities shall be identified with 
at least one sign using letters and figures not less than 12 inches in 
height. Signs for units without helicopter landing facilities shall use 
letters and figures not less than 3 inches in height. Signs shall be 
affixed at a location that is visible to approaching traffic and shall 
contain the following information which may be abbreviated:
    (1) Name of the lease operator,
    (2) The area designation based on OCS Official Protraction Diagrams 
(except in the Pacific OCS Region),
    (3) The block number (lease number in the Pacific OCS Region) in 
which the facility is located, and
    (4) Platform, structure, or rig name.
    (b) For each singly completed well, the lease number and well number 
shall be painted on the wellhead or on a sign affixed to the wellhead. 
In wells with multiple completions, each completion shall be 
individually identified at the wellhead. For subsea wellheads, the 
required sign shall be affixed to the flowline at a convenient surface 
location on the platform to which it is connected. All identifying signs 
shall be maintained in a legible condition.



Sec. 250.16  Reimbursement.

    (a) When geological data, geophysical data, analyzed geological 
information, processed geological and geophysical information, 
reprocessed geological and geophysical information, and interpreted 
geological and geophysical information are submitted to MMS pursuant to 
the requirements of this part (whether or not retained by MMS) and upon 
receipt of a request for reimbursement no later than 90 days from the 
date of delivery and a determination by the Regional Supervisor that the 
requested reimbursement is proper, the lessee or third party shall be 
reimbursed for the reasonable costs of reproducing such data and 
information at the lessee's or third party's lowest rate or at the 
lowest commercial rate established in the area, whichever is less.
    (b) When processed or reprocessed geological or geophysical 
information is submitted to MMS pursuant to the requirements of this 
part (whether retained by the Regional Supervisor or not) and upon 
receipt of a request for reimbursement no later than 90 days from the 
date of delivery and a determination by the Regional Supervisor that the 
requested reimbursement is proper, the lessee or third party shall be 
reimbursed for the reasonable costs attributable to processing and 
reprocessing such information (as distinguished from the cost of data 
acquisition) but only if the processing or reprocessing was in the form 
and manner of processing other than that used in the normal conduct of 
the lessee's business and was done at the specific request of the 
Regional Supervisor.
    (c) Requests for reimbursement shall identify processing and 
reprocessing costs separate from acquisition costs.

[[Page 232]]

    (d) The lessee shall not be reimbursed for the costs of analyzing 
geological information or for interpreting geological or geophysical 
information.



Sec. 250.17  Information and forms.

    (a) Information required to be submitted pursuant to the regulations 
in this part shall be furnished in the manner and form prescribed in the 
regulations in this part or as ordered by the Director. Copies of forms 
may be obtained from the Regional or District Supervisor and shall be 
filled out completely and filed punctually with the Regional or District 
Supervisor. Computer generated forms which are equal in size, 
readability, and paper quality, and which arrange the data in identical 
format, may be submitted in lieu of the forms available from the 
Regional or District Supervisor.
    (b) Reports submitted on forms prescribed under this part or 
otherwise required by the Director shall include a copy marked ``Public 
Information'' which shall include all required information except that 
exempt from public disclosure in Sec. 250.18 or otherwise exempt from 
public disclosure under law or regulation.



Sec. 250.18  Data and information to be made available to the public.

    (a) Except as provided in paragraph (c) of this section or in 
Sec. 252.7 of this chapter, geophysical data, processed geophysical 
information, reprocessed geophysical information, and interpreted 
geological and geophysical information, submitted at any time pursuant 
to the requirements of this part, shall not be available for public 
inspection without the consent of the lessee as long as the lease 
remains in effect, or for a period of 10 years after the date of 
submission, whichever is less, unless the Director determines that:
    (1) The data and information are needed to unitize operations on 2 
or more leases, to ensure proper plans of development for competitive 
reservoirs, or to promote operational safety or protection of the 
environment, and the data and information are shown only to persons with 
an interest in the issue,
    (2) The geological and geophysical data and information are 
necessary for specific scientific or research purposes for the 
Government and the release of such data and information would further 
the nation interest without unduly damaging the competitive position of 
the lessee.
    (b) Except as provided in paragraph (c) of this section or in 
Sec. 252.7 of this chapter, geological data and analyzed geological 
information submitted pursuant to the requirements of this part, shall 
not be available for public inspection without the consent of the lessee 
except under one of the following conditions based on the status of the 
lease at the time of release of the data and information:
    (1) For leases no longer in effect, the data and information will be 
released.
    (2) For a lease in effect, and within the primary term specified in 
the lease, the data and information may be released 2 years after 
submission of the data or information or 60 days after a lease sale such 
that any portion of an offered block is within 50 miles of a well, 
whichever is later. For the purpose of this paragraph 2, the primary 
term specified in a lease shall be deemed to be extended for a period of 
time equal to the period of time for which a suspension of operations is 
granted pursuant to Sec. 250.10 of this part; provided that the primary 
term specified in a lease shall not be deemed to be extended for a 
suspension of operations directed in accordance with Sec. 250.10 (b)(1) 
of this part.
    (3) For leases in effect and beyond the primary term specified in 
the lease, except as provided in paragraph (b)(2) of this section, data 
and information will be released 2 years after submission.
    (4) For all leases, the data and information may be released if the 
Director determines that:
    (i) The data and information are needed to unitize operations on 2 
or more leases, to ensure proper plans of development for competitive 
reservoirs, or to promote operational safety or protection of the 
environment, and the data and information are shown only to persons with 
an interest in the issue;
    (ii) The geological data and information are necessary for specific 
scientific or research purposes for the

[[Page 233]]

Government and the release of such data and information would further 
the national interest without unduly damaging the competitive position 
of the lessee.
    (c) Geophysical data, geological data, processed geological and 
geophysical information, and interpreted geological and geophysical 
information collected on a lease with high-resolution systems 
(including, but not limited to, bathymetry, side-scan sonar, subbottom 
profiler, and magnetometer) in compliance with requirements concerning 
protection of environmental aspects of the lease may be made available 
to the public 60 days after submittal to the Regional Supervisor. 
However, unless the lessee can demonstrate to the satisfaction of the 
Regional Supervisor that release of the data or information would unduly 
damage the lessee's competitive position, the Regional Supervisor may 
release the data and information at an earlier time if the Regional 
Supervisor determines it is needed by affected States to make 
determinations under subpart B, Exploration and Development and 
Production Plans, of this part.
    (d) Data and information identified on Forms MMS-123 through MMS-128 
are protected as follows:
    (1) On Form MMS-123, Application for Permit to Drill, the following 
items of data and information shall not be available for public 
inspection without the consent of the lessee for the same periods as 
those provided in paragraph (b) of this section or until the well goes 
on production, whichever is earlier:
    (i) Item 17, Well Location at Total Depth (Estimated);
    (ii) Item 24, Total Depth (Proposed), MD and TVD;
    (iii) Item 25, Attachments.
    (2) On Form MMS-124, Sundry Notices and Reports on Wells, Item 36, 
Describe Proposed or Completed Operations, shall not be available for 
public inspection without the consent of the lessee for the same periods 
as those provided in paragraph (b) of this section or until the well 
goes on production, whichever is earlier.
    (3) On Form MMS-125, Well Summary Report, the following data and 
information shall not be available for public inspection without the 
consent of the lessee for the same periods as those provided in 
paragraph (b) of this section or until the well goes on production, 
whichever is earlier, except that Item 78, Summary of Porous Zones, and 
Item 85, Geologic Markers, shall not be released when the well goes on 
production unless the period of time specified in paragraph (b) of this 
section has expired.
    (i) Item 17, Well Location at Total Depth (Surveyed);
    (ii) Item 24, Total Depth (Surveyed), MD and TVD;
    (iii) Item 34, Well Status/Type Code;
    (iv) Item 37, Well Location at the Producing Zone (Surveyed);
    (v) Item 46, Top (MD);
    (vi) Item 47, Bottom (MD);
    (vii) Item 48, Top (TVD);
    (viii) Item 49, Bottom (TVD);
    (ix) Item 50, Reservoir Name;
    (x) Item 51, Name(s) of Producing Formation(s) This Completion;
    (xi) Item 52, Hole Size;
    (xii) Item 53, Casing Size;
    (xiii) Item 54, Casing Weight;
    (xiv) Item 55, Grade;
    (xv) Item 56, Setting Depth (MD);
    (xvi) Item 57, Cement Type;
    (xvii) Item 58, Quantity of Cement (FT \3\);
    (xviii) Item 59, Hole Size;
    (xix) Item 60, Tubing Size;
    (xx) Item 61, Tubing Weight;
    (xxi) Item 62, Grade;
    (xxii) Item 63, Setting Depth (MD);
    (xxiii) Item 64, Packer Setting Depth (MD);
    (xxiv) Item 65, Hole Size;
    (xxv) Item 66, Liner Size;
    (xxvi) Item 67, Liner Wt.;
    (xxvii) Item 68, Grade;
    (xxviii) Item 69, Top (MD);
    (xxix) Item 70, Bottom (MD);
    (xxx) Item 71, Cement Type;
    (xxxi) Item 72, Cement Quantity (Ft \3\);
    (xxxii) Item 73, Top (MD);
    (xxxiii) Item 74, Bottom (MD);
    (xxxiv) Item 75, Type of Material;
    (xxxv) Item 76, Material Quantity;
    (xxxvi) Item 77, List of Electric and Other Logs Runs, Directional 
Surveys, Velocity Surveys, and Core Analysis;
    (xxxvii) Item 78, Summary of Porous Zones: Show all zones containing 
hydrocarbons; all cored intervals; and attach all drill stem and well 
potential tests;

[[Page 234]]

    (xxxviii) Item 79, Formation;
    (xxxix) Item 80, Top MD;
    (xl) Item 81, Top TVD;
    (xli) Item 82, Bottom MD;
    (xlii) Item 83, Bottom TVD;
    (xliii) Item 84, Description, Contents, Etc.;
    (xliv) Item 85, Geologic Markers;
    (xlv) Item 86, Top MD;
    (xlvi) Item 87, Top TVD.
    (4) On Form MMS-126, Well Potential Test Report and Request for 
Maximum Production Rate (MPR), Item 101, Static Bottomhole Pressure, is 
not available to the public until 2 years after submittal. All other 
data and information on Form MMS-126 are available to the public upon 
commencement of production.
    (5) On Form MMS-127, Request for Reservoir Maximum Efficient Rate 
(MER), the following data and information are not available for public 
inspection without the consent of the lessee for the same periods as 
those provided in paragraph (b) of this section:
    (i) Item 124, Upper  Cut Off;
    (ii) Item 125, Lower  Cut Off;
    (iii) Item 126, Upper k Cut Off;
    (iv) Item 127, Lower k Cut Off;
    (v) Item 128, G/O Interface;
    (vi) Item 129, W/O Interface;
    (vii) Item 130, G/W Interface;
    (viii) Item 131, Ag;
    (ix) Item 132, Ao;
    (x) Item 133, Vo;
    (xi) Item 134, Vg;
    (xii) Item 135, Ho;
    (xiii) Item 136, ho;
    (xiv) Item 137, Hg;
    (xv) Item 138, Hg;
    (xvi) Item 139, e;
    (xvii) Item 140, Sw;
    (xviii) Item 141, Sg;
    (xix) Item 142, So;
    (xx) Item 143, Boi;
    (xxi) Item 144, Bgi;
    (xxii) Item 145, N;
    (xxiii) Item 146, G;
    (xxiv) Item 147, Kh;
    (xxv) Item 148, Kv;
    (xxvi) Item 149, Avg Well Depth;
    (xxvii) Item 150, Rio;
    (xxviii) Item 151, Rig;
    (xxix) Item 152, RioN;
    (xxx) Item 153, RigG;
    (xxxi) Item 154, Np(2)/N;
    (xxxii) Item 155, Gp(2)/G;
    (xxxiii) Item 156, Degrees API @ 60 deg.F;
    (xxxiv) Item 157, SG;
    (xxxv) Item 158, Rsi;
    (xxxvi) Item 159, oi;
    (xxxvii) Item 160, o;
    (xxxviii) Item 161, Tavg;
    (xxxix) Item 162, Pi;
    (xl) Item 163, PiDATE;
    (xli) Item 164, Pws;
    (xlii) Item 165, PwsDATE;
    (xliii) Item 166; Pb;
    (xliv) Item 167; Pd;
    (xlv) Item 168, Datum Depth.
    (6) All data and information on Form MMS-128 are available for 
public inspection.
    (e) Directional survey data released to the owner of an adjacent 
lease pursuant to Sec. 250.51(e)(5) shall not be released to the public 
without the consent of the lessee from whose lease the directional 
survey was taken.
    (f) Data and information obtained from beneath unleased land as a 
result of a well deviation which has not been approved by the Regional 
Supervisor shall be available to the public.

[53 FR 10690, Apr. 1, 1988, as amended at 59 FR 12161, Mar. 16, 1994]



Sec. 250.19  Accident reports.

    (a) The lessee shall notify the District Supervisor of all serious 
accidents, any death or serious injury, and all fires, explosions, and 
blowouts connected with any activities or operations on the lease. All 
spills of oil or other liquid pollutants must be reported as described 
in Sec. 254.46.
    (b) The owner of an easement, right-of-way, or other permit shall 
comply with paragraph (a) of this section by notification and report 
submittal to the Regional Supervisor for such incidents occurring on the 
area covered by the easement, right-of-way, or other permit.
    (c) Unless otherwise specifically ordered by the Director, all 
investigations conducted under the authority of sections 22(d) (1) and 
(2) of the Act shall be fact-finding proceedings with no civil or 
criminal issues and no adverse parties. The purpose of the investigation 
is to prepare a public report. Such investigations shall satisfy the 
following requirements:
    (1) Any meetings shall be conducted in the appropriate MMS regional 
or

[[Page 235]]

district office or at some other convenient location determined by the 
panel chairperson. The chairperson may open a meeting or any part of it 
to the public if the chairperson determines that it would aid the panel 
in its work.
    (2) All members of the panel shall be present at such meetings if 
possible. The chairperson may designate a member(s) of the panel to 
conduct meetings without all members present if the chairperson finds it 
to be appropriate.
    (3) Appropriate oaths shall be administered by the chairperson or 
his/her designeee to all persons giving testimony.
    (4) A verbatim transcript shall be made of any oral testimony.
    (5) Each person giving testimony shall be allowed to have legal and/
or other representative(s) present to advise or counsel when giving 
testimony to the panel.
    (6) Only the following persons shall address questions to any person 
giving testimony:
    (i) The panel members, the panel's legal advisors, any experts the 
panel deems necessary; and
    (ii) The testimony transcriber.
    (7) The chairperson of the panel may, if necessary, issue a subpoena 
to any witness or person who has knowledge of the accident pursuant to 
section 22(l) of the Act. A witness or a person who has knowledge of the 
accident may be required to attend a meeting at a place not more than 
100 miles from the place where the subpoena is served.
    (8) Any witness or person who has knowledge of the accident and is 
subpoenaed to testify under this subsection shall be entitled to be paid 
the same fees and mileage paid for similar services in the U.S. District 
Courts. The MMS shall pay fees and mileage for those persons that MMS 
has called if the persons so request.
    (9) When the witness(es) or person(s) who has knowledge of the 
accident cannot appear to testify due to injury or who is not required 
to appear as provided in paragraph (c)(7) of this section, the panel may 
then move the meeting site to a location more convenient to the 
witness(es) or person(s), or the panel may accept a sworn written 
statement in lieu of oral testimony.

[53 FR 10690, Apr. 1, 1988, as amended at 55 FR 47752, Nov. 15, 1990; 62 
FR 13996, Mar. 25, 1997]



Sec. 250.20  Safe and workmanlike operations.

    (a) The lessee shall perform all operations in a safe and 
workmanlike manner and shall maintain all equipment in a safe condition 
for the protection of the lease and associated facilities, the health 
and safety of all persons, and the preservation and conservation of 
property and the environment.
    (b) The lessee shall immediately take all necessary precautions to 
control, remove, or otherwise correct any hazardous oil and gas 
accumulation or other health, safety, or fire hazard.
    (c) Crane operations. Cranes installed on fixed platforms shall be 
operated and maintained in accordance with the provisions of the 
American Petroleum Institute (API) Recommended Practice (RP) for 
Operation and Maintenance of Offshore Cranes (API RP 2D) to ensure the 
safety of facility operations. Records of inspection, testing, 
maintenance, and crane operator qualifications in accordance with the 
provisions of API RP 2D shall be kept by the lessee at the lessee's 
field office nearest the Outer Continental Shelf (OCS) facility for a 
period of 2 years.

[53 FR 10690, Apr. 1, 1988, as amended at 55 FR 47752, Nov. 15, 1990]



Sec. 250.21  Access to facilities.

    (a) The lessee shall make available for inspection by MMS 
representatives, all platforms, artificial islands, and other 
installations located on offshore leases. For installations equipped 
with helicopter landing sites and refueling facilities, the lessee shall 
provide the use of those facilities for helicopters used by the MMS in 
the supervision of offshore operations.
    (b) Lessee and nonlessee owners of easements, rights-of-way, or 
other permits shall make available at all reasonable times for 
inspection by MMS the area covered by the lease, easement, right-of-way, 
or permit, all improvements, structures, and fixtures thereon, and all 
records relative to the

[[Page 236]]

design, construction, operation, maintenance, repairs, or investigations 
on or with regard to such area.
    (c) The lessee shall, on request, furnish food, quarters, and 
transportation for MMS representatives to inspect lease facilities and 
operations. Upon request no later than 90 days after furnishing food, 
quarters, and transportation, the lessee will be reimbursed for the 
costs incurred for the food, quarters, and transportation provided MMS 
representatives as determined by the Regional Director.



Sec. 250.22  Best available and safest technologies (BAST).

    (a) The Director shall require on all new drilling and production 
operations and, wherever practicable, on existing operations, the use of 
the BAST, which the Director determines to be economically feasible, 
where ever failure of equipment would have a significant effect on 
safety, health, or the environment, except where the Director determines 
that the incremental benefits are clearly insufficient to justify the 
incremental costs of utilizing such technologies.
    (b) Conformance to the standards, codes, and practices referenced in 
this part will be considered to be the application of BAST. Specific 
equipment and procedures or systems not covered by standards, codes, or 
practices will be analyzed to determine if the failure of such would 
have a significant effect on safety, health, or the environment. If such 
are identified and until specific performance standards are developed by 
MMS and as directed by the Regional Supervisor on a case-by-case basis, 
the lessee shall submit such information necessary to indicate the use 
of BAST, the alternatives considered to the specific equipment or 
procedures, and the rationale as to why one alternative technology was 
considered in place of another. This analysis shall include a discussion 
of the costs involved in the use of such technology and the incremental 
benefits to be gained.



Sec. 250.23  Report of cessation of production.

    When a lease is in its extended term in Sec. 256.37(b), a report 
shall be submitted to the District Supervisor when the last well on the 
lease ceases production. Such a report shall contain the number of the 
well and the date that the last well ceased production and shall be 
submitted within 15 days after the end of the first month in which no 
production occurs. A report is not required when production resumes 
within 15 days after the end of the first month in which no production 
occurs or when production ceases as a result of a suspension of 
production.



Sec. 250.24  Appeals, general.

    Orders or decisions issued under the regulations in this part may be 
appealed in accordance with the provisions of part 290 of this title. 
The filing of an appeal with the Director shall not suspend the 
requirement for compliance with an order or decision other than the 
payment of a civil-penalty. This requirement for compliance shall take 
precedence over any stay that may be granted other than a stay granted 
by the Secretary.



Sec. 250.25  Reports and investigations of apparent violations.

    Any person may report to MMS an apparent violation or failure to 
comply with any provision of the Act, or any provision of a lease, 
license, or permit issued pursuant to the Act, or any provision of any 
regulation or order issued under the Act. When a report of an apparent 
violation has been received or when an apparent violation has been 
detected by MMS personnel, the matter will be investigated in accordance 
with MMS procedures.

[56 FR 20129, May 2, 1991]



Sec. 250.26  Archaeological reports and surveys.

    (a) If the Regional Director believes that an archaeological 
resource may exist in the lease area, the Regional Director will notify 
the lessee in writing. The lessee shall include an archaeological report 
in the Exploration Plan or Development and Production Plan and shall 
comply with the following:
    (1) If the evidence suggests that an archaeological resource may be 
present, the lessee shall either:
    (i) Locate the site of any operation so as not to affect adversely 
the area

[[Page 237]]

where the archaeological resource may be; or
    (ii) Establish to the satisfaction of the Regional Director that an 
archaeological resource does not exist or will not be adversely affected 
by operations. This shall be done by further archaeological 
investigation, conducted by an archaeologist and a geophysicist, using 
survey equipment and techniques deemed necessary by the Regional 
Director. A report on the investigation shall be submitted to the 
Regional Director for review.
    (2) If the Regional Director determines that an archaeological 
resource is likely to be present in the lease area and may be adversely 
affected by operations, the Regional Director will notify the lessee 
immediately. The lessee shall take no action that may adversely affect 
the archaeological resource until the Regional Director has told the 
lessee how to protect it.
    (b) If the lessee discovers any archaeological resource while 
conducting operations in the lease area, the lessee shall immediately 
halt operations within the area of the discovery and report the 
discovery to the Regional Director. If investigations determine that the 
resource is significant, the Regional Director will inform the lessee 
how to protect it.

[59 FR 53093, Oct. 21, 1994]



       Subpart B--Exploration and Development and Production Plans



Sec. 250.30  General requirements.

    All exploration, development, and production activities except for 
preliminary activities shall be conducted in accordance with an 
Exploration Plan or a Development and Production Plan approved by the 
Regional Supervisor. A proposed plan may apply to one or more leases 
held by an individual lessee or may be submitted by a group of lessees. 
The Regional Supervisor may authorize lessees to jointly submit 
environmental information for leases that are in the same planning area 
and have similar environmental conditions. Any reference in this part to 
a Development and Production Plan shall be considered to include the 
Development Operations Coordination Document used in the western Gulf of 
Mexico (GOM) (see Sec. 250.34(d)).

[53 FR 10690, Apr. 1, 1988; 53 FR 26067, July 11, 1988]



Sec. 250.31  Preliminary activities.

    Preliminary activities are geological, geophysical, and other 
surveys necessary to develop a comprehensive Exploration Plan or 
Development and Production Plan. Such preliminary activities are those 
which do not result in any physical penetration of the seabed of greater 
than 500 feet and which do not result in any significant adverse impact 
on the natural resources of the Outer Continental Shelf (OCS). The 
Regional Supervisor may require prior notification of the type, scope, 
and timing of any survey.



Sec. 250.32  Well location and spacing.

    (a) The Regional Supervisor is authorized to approve well location 
and spacing programs necessary for exploration and development of a 
leased sulphur deposit or fluid hydrocarbon reservoir giving 
consideration to, among other factors, the location of drilling units 
and platforms, extent and thickness of the sulphur deposit, geological 
and other reservoir characteristics, number of wells that can be 
economically drilled, protection of correlative rights, optimum recovery 
of resources, minimization of risk to the environment, and prevention of 
any unreasonable interference with other uses of the OCS. Well location 
and spacing programs shall be determined independently for each leased 
sulphur deposit or hydrocarbon-bearing reservoir in a manner that will 
locate wells in the optimum position for the most effective production 
of sulphur and/or reservoir fluids and avoid the drilling of unnecessary 
wells.
    (b) For wells which could intersect or drain an offset property, the 
Regional Supervisor may require special measures to protect the rights 
of the lessor and objecting offset lessees.
    (c) The lessee shall drill and produce the wells the Regional 
Supervisor determines are necessary to protect the lessor from loss by 
reason of production on other properties or in lieu

[[Page 238]]

thereof, with the approval of the Regional Supervisor, pay a sum 
determined by the Regional Supervisor as adequate to compensate the 
lessor for the lessee's failure to drill and produce any well. Payment 
of that sum shall be considered as the equivalent of production in 
paying quantities for the purpose of extending the lease term.

[53 FR 10690, Apr. 1, 1988, as amended at 55 FR 47752, Nov. 15, 1990; 56 
FR 32099, July 15, 1991]



Sec. 250.33  Exploration Plan.

    (a) The leasee shall submit for approval an Exploration Plan which 
includes the following:
    (1) The proposed type and sequence of exploration activities to be 
undertaken together with a timetable for their performance from 
commencement to completion.
    (2) A description of the type of mobile drilling unit, platform, or 
artificial island to be used including a discussion of the drilling 
program and important safety and pollution-prevention features. In the 
Alaska OCS Region, lessees shall include provisions for--
    (i) Drilling a relief well should a blowout occur,
    (ii) Loss or disablement of a drilling unit, and
    (iii) Loss or damage to support craft.
    (3) A table indicating the approximate location of each proposed 
exploratory well, including surface locations, proposed well depths, and 
water depth at well sites.
    (b) The lessee shall submit the following supporting information to 
accompany the Exploration Plan:
    (1) Data and information described below which the Regional 
Supervisor deems necessary to evaluate geologic conditions:
    (i) Current structure contour maps drawn to the top of each 
prospective hydrocarbon accumulation showing the approximate surface and 
bottomhole location of each proposed well.
    (ii) Full-scale interpreted, and if appropriate, migrated Common 
Depth Point seismic lines intersecting at or near the primary well 
locations.
    (iii) A time versus depth chart based on the appropriate velocity 
analysis in the area of interpretation.
    (iv) Interpreted structure sections corresponding to each seismic 
line submitted in paragraph (b)(1)(ii) of this section showing the 
location and proposed depth of each well.
    (v) A generalized stratigraphic column from the surface to total 
depth.
    (vi) A description of the geology of the prospect.
    (vii) A plat showing exploration seismic coverage of the lease.
    (viii) A bathymetry map showing surface locations of proposed wells.
    (ix) An analysis of seafloor and subsurface geologic and manmade 
hazards. Unless the lessee can demonstrate to the satisfaction of the 
Regional Supervisor that data sufficient to determine the presence or 
absence of such conditions are available, the lessee shall conduct a 
shallow hazards survey in accordance with the Regional Supervisor's 
specifications. The Regional Supervisor may require the submission of a 
shallow hazards report and the data upon which the analysis is based.
    (2) An oil-spill response plan as described in part 254 or reference 
to an approved Regional Response Plan.
    (3) A discussion of the measures that have been or will be taken to 
satisfy the conditions of lease stipulations.
    (4) A list of the proposed drilling fluids, including components and 
their chemical compositions, information on the projected amounts and 
rates of drilling fluid and cuttings discharges, and method of disposal.
    (5) Information concerning the presence of hydrogen sulfide 
(H2S) and the following proposed precautionary measures:
    (i) A classification of the lease area as to whether it is within an 
area known to contain H2S, an area where the presence of 
H2S is unknown, or an area where the absence of 
H2S has been confirmed as described in Sec. 250.67 of this 
part and the documentation supporting the classification; and
    (ii) If the classification is an area known to contain 
H2S or an area where the presence of H2S is 
unknown, an H2S Contingency Plan as required in Sec. 250.67 
of this part.
    (6) A detailed discussion of new or unusual technology to be 
employed. The lessee shall indicate which portions of the supporting 
information the

[[Page 239]]

lessee believes are exempt from disclosure under the Freedom of 
Information Act (FOIA) (5 U.S.C. 552) and the implementing regulations 
(43 CFR part 2). The lessee shall include a written discussion of the 
general subject matter of the deleted portions for transmittal to the 
recipients of plan copies.
    (7) A brief description of the onshore facilities to be used to 
support the exploration activities including information as to whether 
the facilities are existing, proposed, or are to be expanded; a brief 
description of support vessels to be used and information concerning 
their frequency of travel; and a map showing the lease relative to the 
shoreline and depicting proposed transportation routes.
    (8) For onshore support facilities, except in the western GOM, 
indicate the following:
    (i) The location, size, number, and land requirements (including 
rights-of-way and easements) of the onshore support and storage 
facilities and, where possible, a timetable for the acquisition of lands 
and the construction or expansion of any facilities.
    (ii) The estimated number of persons expected to be employed in 
support of offshore, onshore, and transportation activities and, where 
possible, the approximate number of new employees and families likely to 
move into the affected area.
    (iii) Major supplies, services, energy, water, or other resources 
within affected States necessary for carrying out the related plan.
    (iv) The source, composition, frequency, and duration of emissions 
of air pollutants.
    (9) The quantity, composition, and method of disposal of solid and 
liquid wastes and pollutants likely to be generated by offshore, 
onshore, and transportation operations.
    (10) Historic weather patterns and other meteorological conditions 
of offshore areas including temperature, sky cover and visibility, 
precipitation, storm frequency and magnitude, wind direction and 
velocity, and freezing and icing conditions listing, where possible, the 
means and extremes of each.
    (11) Physical oceanography including onsite direction and velocity 
of currents and tides, sea states, temperature, and salinity, water 
quality, and icing conditions, where appropriate.
    (12) Onsite flora and fauna including both pelagic and benthic 
communities, transitory birds and mammals that may breed or migrate 
through the area when proposed activities are being conducted, 
identification of endangered and threatened species and their critical 
habitats that could be affected by proposed activities, and typical 
fishing seasons and locations of fishing activities. The results of any 
biological surveys required by the Regional Supervisor (including a copy 
of survey reports or references to previously submitted reports) should 
be incorporated into this discussion.
    (13) Environmentally sensitive areas (onshore as well as offshore), 
e.g., refuges, preserves, sanctuaries, rookeries, calving grounds, and 
areas of particular concern identified by an affected State pursuant to 
the Coastal Zone Management Act (CZMA) which may be affected by the 
proposed activities.
    (14) Onsite uses of the area based on information available, e.g., 
shipping, military use, recreation, boating, commercial fishing, 
subsistence hunting and fishing, and other mineral exploration in the 
area.
    (15) If the Regional Director believes that an archaeological 
resource may exist in the lease area, the Regional Director will notify 
the lessee in writing. Prior to commencing any operations, the lessee 
shall prepare a report, as specified by the Regional Director, to 
determine the potential existence of any archaeological resource that 
may be affected by operations. The report shall be prepared by an 
archaeologist and geophysicist and shall be based on an assessment of 
data from remote-sensing surveys and of other pertinent archaeological 
and environmental information.
    (16) Existing and planned monitoring systems that are measuring or 
will measure environmental conditions and provide data and information 
on the impacts of activities in the geographic areas.
    (17) An assessment of the direct and cumulative effects on the 
offshore and onshore environments expected to occur as a result of 
implementation of the Exploration Plan, expressed in

[[Page 240]]

terms of magnitude and duration, with special emphasis upon the 
identification and evaluation of unavoidable and irreversible impacts on 
the environment. Measures to minimize or mitigate impacts should be 
identified and discussed.
    (18) Certificate(s) of coastal zone consistency as provided in 15 
CFR part 930.
    (19) For each OCS facility, the lessee shall submit the information 
described below when it is needed to make the findings under Sec. 250.45 
or Sec. 250.46 of this part:
    (i)(A) Projected emissions from each proposed or modified facility 
for each year of operation and the basis for all calculations to include 
(if the drilling unit has not yet been determined, the lessee shall use 
worst-case estimates for the type of unit proposed):
    (1) For each source, the amount of the emission by air pollutant 
expressed in tons per year and the frequency and duration of emissions.
    (2) For each facility, the total amount of emissions by air 
pollutant expressed in tons per year and, in addition for a modified 
facility only, the incremental amount of total emissions by air 
pollutant resulting from the new or modified source(s).
    (3) A detailed description of all processes, processing equipment, 
and storage units, including information on fuels to be burned.
    (4) A schematic drawing which identifies the location and elevation 
of each source.
    (5) If projected emissions are based on the use of emission-
reduction control technology, a description of the controls providing 
the information required by paragraph (b)(19)(iv) of this section.
    (B) The distance of each proposed facility from the mean high water 
mark (mean higher high water mark on the Pacific coast) of any State.
    (ii)(A) The model(s) used to determine the effect on the onshore air 
quality of emissions from each facility, or from other facilities when 
required by the Regional Supervisor, and the results obtained through 
the use of the model(s). Only model(s) that has been approved by the 
Director may be used.
    (B) The best available meteorological information and data 
consistent with the model(s) used stating the basis for the data and 
information selected.
    (iii) The air quality status of any onshore area where the air 
quality is significantly affected (within the meaning of Sec. 250.45 of 
this part) by projected emissions from each facility proposed in the 
plan. The area should be classified as nonattainment, attainment, or 
unclassifiable to include the status of each area by air pollutant, the 
class of attainment area, and the air-pollution control agency whose 
jurisdiction covers the area identified.
    (iv) The emission-reduction controls available to reduce emissions, 
including the source, the emission-reduction control technology, 
reductions to be achieved, and monitoring system the lessee proposes to 
use to measure emissions. The lessee shall indicate which emission-
reduction control technology the lessee believes constitutes the best 
available control technology and the basis for that opinion.
    (20) The name, address, and telephone number of an individual 
employee of the lessee to whom inquiries by the Regional Supervisor and 
the affected State(s) may be made.
    (21) Such other information and data as the Regional Supervisor may 
require.
    (c) Information and data discussed in other documents previously 
submitted to MMS or otherwise readily available to reviewers may be 
referenced. The material being referenced shall be cited, described 
briefly, and include a statement of where the material is available for 
inspection. Any material based on proprietary data which is not itself 
available for inspection shall not be so referenced.
    (d) The Regional Director, after consultation with the Governor of 
the affected State(s) or the Governor's designated representative, the 
CZM agency of affected State(s), and the Office of Ocean and Coastal 
Resource Management of the National Oceanic and Atmospheric 
Administration (NOAA) may limit the amount of information required to be 
included to that necessary to assure conformance with the Act, other 
laws, applicable regulations, and lease provisions.
    (e) The Regional Supervisor shall determine within 10 working days 
after

[[Page 241]]

receipt of the Exploration Plan whether additional information is 
needed. If no deficiencies are identified and the required number of 
copies have been received, the plan will be deemed submitted.
    (f) Within 2 working days after the date an Exploration Plan has 
been deemed submitted, the Regional Supervisor shall transmit by 
receipted mail a copy of the plan, except for those portions determined 
to be exempt from disclosure under the FOIA and the implementing 
regulations (43 CFR part 2), to the Governor or the Governor's 
designated representative and the CZM agency of each affected State. 
Receipt of the plan by the CZM agency initiates the State coastal zone 
consistency review period.
    (g) In accordance with the National Environmental Policy Act (NEPA), 
the Regional Supervisor shall evaluate the environmental impacts of the 
activities described in the Exploration Plan.
    (h) In the evaluation of an Exploration Plan, the Regional 
Supervisor shall consider written comments from the Governor of an 
affected State or the Governor's designated representative which are 
received prior to the deadline specified by the Regional Supervisor. The 
Regional Supervisor may consult directly with affected States regarding 
matters contained in the comments.
    (i) Within 30 days of submission of a proposed Exploration Plan, the 
Regional Supervisor shall accomplish one of the following:
    (1) Approve the plan;
    (2) Require the lessee to modify any plan which is inconsistent with 
the provisions of the lease, the Act, or the regulations prescribed 
under the Act including air quality, environmental, safety, and health 
requirements; or
    (3) Disapprove the plan if the Regional Supervisor determines that a 
proposed activity would probably cause serious harm or damage to life 
(including fish and other aquatic life), property, natural resources 
offshore including any mineral deposits (in areas leased or not leased), 
the national security or defense, or the marine, coastal, or human 
environment, and that the proposed activity cannot be modified to avoid 
the condition(s).
    (j) The Regional Supervisor shall notify the lessee in writing of 
the reason(s) for disapproving an Exploration Plan or for requiring 
modification of a plan. For plans requiring modification, the Regional 
Supervisor shall also notify the lessee in writing of the conditions 
that must be met for plan approval.
    (k)(1) The lessee may resubmit an Exploration Plan, as modified, to 
the Regional Supervisor in the same manner as for a new plan. Only 
information related to the proposed modifications need be submitted. The 
Regional Supervisor shall approve, disapprove, or require modification 
of the resubmitted plan based upon the criteria in paragraph (i) of this 
section within 30 days of the resubmission date.
    (2) An Exploration Plan which has been disapproved pursuant to 
paragraph (i)(3) of this section may be resubmitted if there is a change 
in the conditions which caused it to be disapproved. The Regional 
Supervisor shall approve, require modification, or disapprove such a 
plan within 30 days of the resubmission date.
    (l) When a State objects to a lessee's coastal zone consistency 
certification, the lessee shall modify the plan to accommodate the 
State's objection(s) and resubmit the plan to--
    (1) The Regional Supervisor for review pursuant to the criteria in 
paragraphs (h), (i), and (j) of this section; and
    (2) Through the Regional Supervisor to the State for review pursuant 
to the CZMA and the implementing regulations (15 CFR 930.83 and 930.84).

Alternatively, the lessee may appeal the State's objection to the 
Secretary of Commerce pursuant to the procedures described in section 
307 of the CZMA and the implementing regulations (subpart H of 15 CFR 
part 930). The Regional Supervisor shall approve or disapprove a plan as 
resubmitted within 30 days of the resubmission date.
    (m) If the Regional Supervisor disapproves an Exploration Plan, the 
Secretary may, subject to the provisions of section 5(a)(2)(B) of the 
Act and the implementing regulations in Sec. 250.12 and 256.77 of this 
chapter II, cancel the lease(s), and the lessee shall be entitled

[[Page 242]]

to compensation in accordance with section 5(a)(2)(c) of the Act.
    (n)(1) The Regional Supervisor shall periodically review the 
activities being conducted under an approved Exploration Plan and may 
request updated information on schedules and procedures. The frequency 
and extent of the Regional Supervisor's review shall be based upon the 
significance of any changes in available information and in other 
onshore or offshore conditions affecting or affected by exploration 
activities being conducted pursuant to the plan. If the review indicates 
that the plan should be revised to meet the requirements of this part, 
the Regional Supervisor shall require the needed revision.
    (2) Revisions to an approved or pending Exploration Plan, whether 
initiated by the lessee or ordered by the Regional Supervisor, shall be 
submitted to the Regional Supervisor for approval. Only information 
related to the proposed revisions need be submitted. When the Regional 
Supervisor determines that a proposed revision could result in a 
significant change in the impacts previously identified and evaluated or 
requires additional permits, the revisions shall be subject to all of 
the procedures in this section.
    (o) To ensure safety and protection of the environment and 
archaeological resources, the Regional Director may authorize or direct 
the lessee to conduct geological, geophysical, biological, 
archaeological, or other surveys or monitoring programs. The lessee 
shall provide the Regional Director, upon request, with copies of any 
data obtained as a result of those surveys and monitoring programs.
    (p) The lessee may not drill any well until the District 
Supervisor's approval of an Application for Permit to Drill (APD), 
submitted in accordance with the requirements of Sec. 250.64 of this 
part, has been received. The District Supervisor shall not approve any 
APD until all affected States with approved CZM programs have concurred 
or have been conclusively presumed to concur with the applicant's 
coastal zone consistency certification accompanying a plan, or the 
Secretary of Commerce has made the finding authorized by section 
307(c)(3)(B)(iii) of the CZMA. The APD's must conform to the activities 
described in detail in the approved Exploration Plan and shall not be 
subject to a separate State coastal zone consistency review.
    (q) Nothing in this section or in an approved plan shall limit the 
lessee's responsibility to take appropriate measures to meet emergency 
situations. In such situations, the Regional Supervisor may approve or 
require departures from an approved Exploration Plan.

[53 FR 10690, Apr. 1, 1988; 53 FR 26067, July 11, 1988, as amended at 54 
FR 50616, Dec. 8, 1989; 59 FR 53093, Oct. 21, 1994; 62 FR 13996, Mar. 
25, 1997]



Sec. 250.34  Development and Production Plan.

    (a) The lessee shall submit for approval a Development and 
Production Plan which includes the following:
    (1) A description of and schedule for the development and production 
activities to be performed including plan commencement date, date of 
first production, total time to complete all development and production 
activities, and dates and sequences for drilling wells and installing 
facilities and equipment.
    (2) A description of any drilling vessels, platforms, pipelines, or 
other facilities and operations located offshore which are proposed or 
known by the lessee (whether or not owned or operated by the lessee) to 
be directly related to the proposed development, including the location, 
size, design, and important safety, pollution prevention, and 
environmental monitoring features of the facilities and operations.
    (b) The lessee shall submit the following supporting information to 
accompany the Development and Production Plan:
    (1) Geological and geophysical (G&G) data and information, including 
the following:
    (i) A plat showing the surface location of any proposed fixed 
structure or well.
    (ii) A plat showing the surface and bottomhole locations and giving 
the measured and true vertical depths for each proposed well.
    (iii) Current interpretations of relevant G&G data.

[[Page 243]]

    (iv) Current structure map(s) showing the surface and bottomhole 
location of each proposed well and the depths of expected productive 
formations.
    (v) Interpreted structure sections showing the depths of expected 
productive formations.
    (vi) A bathymetric map showing surface locations of fixed structures 
and wells or a table of water depths at each proposed site.
    (vii) A discussion of seafloor conditions including a shallow 
hazards analysis for proposed drilling and platform sites and pipeline 
routes. This information shall be derived from the shallow hazards 
report required by Sec. 250.139 of this part.
    (2) Information concerning the presence of H2S and 
proposed precautionary measures, including the following:
    (i) A classification of the lease area as to whether it is within an 
area known to contain H2S, an area where the presence of 
H2S is unknown, or an area where the absence of 
H2S has been confirmed as described in Sec. 250.67 of this 
part and the documentation supporting the classification; or
    (ii) If the classification is an area known to contain 
H2S or an area where the presence of H2S is 
unknown, an H2S Contingency Plan as required in Sec. 250.67 
of this part.
    (3) A description of the environmental safeguards to be implemented, 
including an updated oil-spill response plan as described in part 254 of 
this chapter or reference to an approved plan.
    (4) A discussion of the steps that have been or will be taken to 
satisfy the conditions of lease stipulations.
    (5)(i) A description of technology and reservoir engineering 
practices intended to increase the ultimate recovery of oil and gas, 
i.e., secondary, tertiary, or other enhanced recovery practices;
    (ii) A description of technology and recovery practices and 
procedures intended to assure optimum recovery of sulphur; or
    (iii) A description of technology and recovery practices and 
procedures intended to assure optimum recovery of oil and gas and 
sulphur.
    (6) A discussion of the proposed drilling and completion programs.
    (7) A detailed description of new or unusual technology to be 
employed. The lessee shall indicate which portions of the information 
the lessee believes are exempt from disclosure under the FOIA (5 U.S.C. 
552) and the implementing regulations (43 CFR part 2). The lessee shall 
include a written discussion of the general subject matter of the 
deleted portions for transmittal to recipients of plan copies.
    (8) A brief description of the following:
    (i) The location, description, and size of any offshore, and to the 
maximum extent practicable, land-based operations to be conducted or 
contracted for as a result of the proposed activity, including the 
following:
    (A) The acreage required within a State for facilities, rights-of-
way, and easements.
    (B) The means proposed for transportation of oil, gas, and sulphur 
to shore; the routes to be followed by each mode of transportation; and 
the estimated quantities of oil, gas, and sulphur to be moved along such 
routes.
    (C) An estimate of the frequency of boat and aircraft departures and 
arrivals, the onshore location of terminals, and the normal routes for 
each mode of transportation.
    (ii) A list of the proposed drilling fluids including components and 
their chemical compositions, information on the projected amounts and 
rates of drilling fluid and cuttings discharges, and method of disposal. 
If the information is provided in an approved Environmental Protection 
Agency, National Pollutant Discharge Elimination System permit, or a 
pending permit application, the lessee may reference these documents.
    (iii) The quantities, types, and plans for disposal of other solid 
and liquid wastes and pollutants likely to be generated by offshore, 
onshore, and transport operations and, regarding any wastes which may 
require onshore disposal, the means of transportation to be used to 
bring the wastes to shore, disposal methods to be utilized, and location 
of onshore waste disposal or treatment facilities.

[[Page 244]]

    (iv) The following information on onshore support facilities, except 
in the western GOM:
    (A) The approximate number, timing, and duration of employment of 
persons who will be engaged in onshore development and production 
activities, an approximate number of local personnel who will be 
employed for or in support of the development activities (classified by 
the major skills or crafts that will be required from local sources and 
estimated number of each such skill needed), and the approximate total 
number of persons who will be employed during the onshore construction 
activity and during all activities related to offshore development and 
production.
    (B) The approximate number of people and families to be added to the 
population of local nearshore areas as a result of the planned 
development.
    (C) An estimate of significant quantities of energy and resources to 
be used or consumed including electricity, water, oil and gas, diesel 
fuel, aggregate, or other supplies which may be purchased within an 
affected State.
    (D) The types of contractors or vendors which will be needed, 
although not specifically identified, and which may place a demand on 
local goods and services.
    (E) The source, composition, frequency, and duration of emissions of 
air pollutants.
    (v) A narrative description of the existing environment with an 
emphasis placed on those environmental values that may be affected by 
the proposed action. This section shall contain a description of the 
physical environment of the area covered by the related plan. This 
portion of the plan shall include data and information obtained or 
developed by the lessee together with other pertinent information and 
data available to the lessee from other sources. The environmental 
information and data shall include the following, where appropriate:
    (A) If the Regional Director believes that an archaeological 
resource may exist in the lease area, the Regional Director will notify 
the lessee in writing. Prior to commencing any operations, the lessee 
shall prepare a report, as specified by the Regional Director, to 
determine the potential existence of any archaeological resource that 
may be affected by operations. The report shall be prepared by an 
archaeologist and geophysicist and shall be based on an assessment of 
data from remote-sensing surveys and of other pertinent archaeological 
and environmental information.
    (B) The aquatic biota, including a description of fishery and marine 
mammal use of the lease and the significance of the lease, and a 
description of any threatened and endangered species and their critical 
habitat. The results of any biological surveys required by the Regional 
Supervisor (including a copy of survey reports or references to 
previously submitted reports) should be incorporated into these 
discussions.
    (C) Environmentally sensitive areas (e.g., refuges, preserves, 
sanctuaries, rookeries, calving grounds, coastal habitat, beaches, and 
areas of particular environmental concern) which may be affected by the 
proposed activities.
    (D) The predevelopment, ambient water-column quality and temperature 
data for incremental depths for the areas encompassed by the plan.
    (E) The physical oceanography, including ocean currents described as 
to prevailing direction, seasonal variations, and variations at 
different water depths in the lease.
    (F) Historic weather patterns and other meteorological conditions, 
including storm frequency and magnitude, wave height and direction, wind 
direction and velocity, air temperature, visibility, freezing and icing 
conditions, and ambient air quality listing, where possible, the means 
and extremes of each.
    (G) The other uses of the area known to the lessee, including 
military use for national security or defense, subsistence hunting and 
fishing, commercial fishing, recreation, shipping, and other mineral 
exploration or development.
    (H) The existing or planned monitoring systems that are measuring or 
will measure impacts of activities on the environment in the planning 
area.
    (9) For sulphur operations, the degree of subsidence that is 
expected at various stages of production, and measures that will be 
taken to assure safety

[[Page 245]]

of operations and protection of the environment. Special attention shall 
be given to the effects of subsidence on existing or potential oil and 
gas production, fixed bottom-founded structures, and pipelines.
    (10) For sulphur operations, a discussion of the potential toxic or 
thermal effects on the environment caused by the discharge of 
bleedwater, including a description of the measures that will be taken 
into account to mitigate these impacts.
    (11) An assessment of the effects on the environment expected to 
occur as a result of implementation of the plan, identifying specific 
and cumulative impacts that may occur both onshore and offshore, and the 
measures proposed to mitigate these impacts. Such impacts shall be 
quantified to the fullest extent possible including magnitude and 
duration and shall be accumulated for all activities for each of the 
major elements of the environment (e.g., water or biota).
    (12) A discussion of alternatives to the activities proposed that 
were considered during the development of the plan including a 
comparison of the environmental effects.
    (13) Certificate(s) of coastal zone consistency as provided in 15 
CFR part 930.
    (14) For each OCS facility, such information described below needed 
to make the findings under Sec. 250.45 or Sec. 250.46 of this part:
    (i)(A) Projected emissions from each proposed or modified facility 
for each year of operation and basis for all calculations to include the 
following:
    (1) For each source, the amount of the emission by air pollutant 
expressed in tons per year and frequency and duration of emissions;
    (2) For each proposed facility, the total amount of emissions by air 
pollutant expressed in tons per year, the frequency distribution of 
total emissions by air pollutant expressed in pounds per day and, in 
addition for a modified facility only, the incremental amount of total 
emissions by air pollutant resulting from the new or modified source(s);
    (3) A detailed description of all processes, processing equipment, 
and storage units, including information on fuels to be burned;
    (4) A schematic drawing which identifies the location and elevation 
of each source; and
    (5) If projected emissions are based on the use of emission-
reduction control technology, a description of the controls providing 
the information required by paragraph (b)(12)(iv)(A) of this section.
    (B) The distance of each proposed facility from the mean high water 
mark (mean higher high water mark on the Pacific coast) of any State.
    (ii)(A) The model(s) used to determine the effect on the onshore air 
quality of emissions from each facility, or from other facilities when 
required by the Regional Supervisor, and the result obtained through the 
use of the model(s). Only model(s) that has been approved by the 
Director may be used.
    (B) The best available meteorological information and data 
consistent with the model(s) used stating the basis for the information 
and data selected.
    (iii) The air quality status of any onshore area where the air 
quality is significantly affected (within the meaning of Sec. 250.45 of 
this part) by projected emissions from each facility proposed in the 
plan. The area should be classified as nonattainment, attainment, or 
unclassifiable listing the status of each area by air pollutant, the 
class of attainment areas, and the air pollution control agency whose 
jurisdiction covers the area identified.
    (iv)(A) The emission-reduction controls available to reduce 
emissions including the source, emission-reduction control technology, 
reductions to be achieved, and monitoring system the lessee proposes to 
use to measure emissions. The lessee shall indicate which emission-
reduction control technology the lessee believes constitutes the best 
available control technology and the basis for that opinion.
    (B) The ownership of the offshore and onshore offsetting source(s) 
and the reduction obtainable from each offsetting source.
    (15) A brief discussion of any approved or anticipated suspensions 
of production necessary to hold the lease(s) in an active status.
    (16) The name, address, and telephone number of an individual 
employee of

[[Page 246]]

the lessee to whom inquiries by the Regional Supervisor and the affected 
State(s) may be directed.
    (17) Such other data and information as the Regional Supervisor may 
require.
    (c) Data and information discussed in other documents previously 
submitted to MMS or otherwise readily available to reviewers may be 
incorporated by reference. The material being incorporated shall be 
cited and described briefly and include a statement of where the 
material is available for inspection. Any material based on proprietary 
data which is not itself available for inspection shall not be 
incorporated by reference.
    (d)(1) Development and Production Plans are not required for leases 
in the western GOM. For these leases, the lessee shall submit to the 
Regional Supervisor for approval a Development Operations Coordination 
Document with all information necessary to assure conformance with the 
Act, other laws, applicable regulations, lease provisions, or as 
otherwise needed to carry out the functions and responsibilities of the 
Regional Supervisor.
    (2) Any information required in paragraph (d)(1) of this section 
shall be considered a Development and Production Plan for the purpose of 
references in any law, regulation, lease provision, agreement, or other 
document referring to the preparation or submission of a plan.
    (e) The Regional Director, after consultation with the Governor(s) 
of the affected State(s) or the Governor's designated representative, 
the CZM agency of the affected State(s), and the Office of Ocean and 
Coastal Resource Management of NOAA may limit the amount of information 
required to be included in a Development and Production Plan to that 
necessary to assure conformance with the Act, other laws, applicable 
regulations, and lease provisions. In determining the information to be 
included in a plan, the Regional Director shall consider current and 
expected operating conditions together with experience gained during 
past operations of a similar nature in the area of proposed activities.
    (f) The Regional Supervisor shall determine within 20 working days 
after receipt whether additional material is needed. If no deficiencies 
are identified and the requested number of copies have been received, 
the plan shall be deemed submitted.
    (g) Within 5 working days after a Development and Production Plan 
has been deemed submitted, the Regional Supervisor shall transmit a copy 
of the plan, except for those portions of the plan determined to be 
exempt from disclosure under the FOIA and the implementing regulations 
(43 CFR part 2), to the Governor or the Governor's designated 
representative and the CZM agency of each affected State and to the 
executive of each affected local government that requests a copy. The 
Regional Supervisor shall make copies available to appropriate Federal 
Agencies, interstate entities, and the public. The plan will be 
available for review at the appropriate MMS Regional Public Information 
Office.
    (h) The Governor or the Governor's designated representative and the 
CZM agency of each affected State and the executive of each affected 
local government shall have 60 days from the date of receipt of the 
Development and Production Plan to submit comments and recommendations 
to the Regional Supervisor. The executive of any affected local 
government must forward all recommendations to the Governor of the State 
prior to submitting them to the Regional Supervisor. The Regional 
Supervisor shall accept those recommendations from the Governor that 
provide for a reasonable balance between the national interest and the 
well-being of the citizens of the affected State. The Regional 
Supervisor shall explain in writing the reasons for accepting or 
rejecting any recommendations. In addition, any interested Federal 
Agency or person may submit comments and recommendations to the Regional 
Supervisor. All comments and recommendations shall be made available to 
the public.
    (i) The plan will be processed in accordance with the regulations in 
this section and the regulations governing Federal CZM consistency 
procedures (15 CFR part 930).
    (j) The Regional Supervisor shall evaluate the environmental impact 
of

[[Page 247]]

the activities described in the Development and Production Plan and 
prepare the appropriate environmental documentation in accordance with 
NEPA. At least once in each planning area, as identified by the 
Director, other than the western and central GOM planning areas, the 
Director shall determine that an Environmental Impact Statement (EIS) is 
required. A determination by the Director that approval of a Development 
and Production Plan requires proceedings under NEPA shall have no effect 
upon the timeframe that a State has to complete its coastal zone 
consistency review. Copies of the draft EIS shall be transmitted to the 
Governor of each affected State and the executive of each affected local 
government that requests a copy. The Regional Supervisor shall also make 
copies of the draft EIS available to any appropriate Federal Agency, 
interstate entity, and the public.
    (k) Prior to or immediately after a determination by the Director 
that approval of a Development and Production Plan requires that the 
procedures under NEPA shall commence, the Regional Supervisor may 
require lessees of tracts in the vicinity, for which Development and 
Production Plans have not been approved, to submit preliminary or final 
plans for their leases.
    (l) No later than 60 days after the last day of the comment period 
provided in paragraph (h) of this section or within 60 days of the 
release of the final EIS describing the proposed activities, the 
Regional Supervisor shall accomplish the following:
    (1) Approve the plan;
    (2) Require modification of the plan if it is determined that the 
lessee has failed to make adequate provisions for safety, environmental 
protection, or conservation of resources including compliance with the 
regulations prescribed under the Act; or
    (3) Disapprove the plan if one or more of the following occurs:
    (i) The lessee fails to demonstrate that compliance with the 
requirements of the Act, provisions of the regulations prescribed under 
the Act, or other applicable Federal laws is possible;
    (ii) State concurrence with the applicant's coastal zone consistency 
certification has not been received, the State's concurrence has not 
been conclusively presumed, or the State objects to the consistency 
certification, and the Secretary of Commerce does not make the 
determination authorized by section 307(c)(3)(B)(iii) of the CZMA;
    (iii) Operations threaten national security or defense; or
    (iv) Exceptional geological conditions in the lease area, 
exceptional resource value in the marine or coastal environment, or 
other exceptional circumstances exist, and all of the following:
    (A) Implementation of the plan would probably cause serious harm or 
damage to life (including fish and other aquatic life), property, any 
mineral deposits (in areas leased or not leased), the national security 
or defense, or to the marine, coastal, or human environments.
    (B) The threat of harm or damage will not disappear or decrease to 
an acceptable extent within a reasonable period of time.
    (C) The advantages of disapproving the plan outweigh the advantages 
of development and production.
    (m) The Regional Supervisor shall notify the lessee in writing of 
the reason(s) for disapproving a Development and Production Plan or for 
requiring modification of a plan and the conditions which must be met 
for plan approval.
    (n) The lessee may resubmit a Development and Production Plan, as 
modified, to the Regional Supervisor. Only information related to the 
proposed modifications need be submitted. Within 60 days following the 
60-day comment period provided for in paragraph (h) of this section, the 
Regional Supervisor shall approve, disapprove, or require modification 
of the modified plan.
    (o)(1) If a Development and Production Plan is disapproved for the 
sole reason that a State consistency certification has not been 
obtained, the Regional Supervisor shall approve the plan upon receipt of 
the concurrence, at the time when concurrence is conclusively presumed, 
or when the Secretary of Commerce makes a finding authorized by section 
307(c)(3)(B)(iii) of the CZMA.

[[Page 248]]

    (2) If a Development and Production Plan is disapproved because a 
State objects to the lessee's coastal zone consistency certification, 
the lessee shall modify the plan to accommodate the State's objection(s) 
and resubmit the plan to (i) the Regional Supervisor for review pursuant 
to the criteria in paragraph (l) of this section; and (ii) through the 
Regional Supervisor, to the State for review pursuant to the CZMA and 
the implementing regulations (15 CFR 930.83 and 930.84). Alternatively, 
the lessee may appeal the State's objection to the Secretary of Commerce 
pursuant to the procedures described in section 307 of the CZMA and the 
implementing regulations (subpart H of 15 CFR part 930). The Regional 
Supervisor shall approve, disapprove, or require modification of a plan 
as revised within 60 days following the 60-day comment period provided 
for in paragraph (h) of this section.
    (p) Development and Production Plans disapproved pursuant to 
paragraph (l)(3) of this section are subject to the provisions of 
section 25(h)(2) of the Act and the implementing regulations in 
Secs. 250.12 and 256.77 of this chapter.
    (q)(1) The Regional Supervisor shall periodically review the 
activities being conducted under an approved Development and Production 
Plan. The frequency and extent of the Regional Supervisor's review shall 
be based upon the significance of any changes in available information 
and onshore or offshore conditions affecting or impacted by development 
or production activities being conducted pursuant to the plan. If the 
review indicates that the plan should be revised to meet the 
requirements of this part, the Regional Supervisor shall require the 
needed revisions.
    (2) Revisions to an approved or pending Development and Production 
Plan, whether initiated by the lessee or ordered by the Regional 
Supervisor, shall be submitted to the Regional Supervisor for approval. 
Only information related to the proposed revisions need be submitted. 
When the Regional Supervisor determines that a proposed revision could 
result in a significant change in the impacts previously identified and 
evaluated, requires additional permits, or proposes activities not 
previously identified and evaluated, the revision shall be subject to 
all of the procedures in this section.
    (3) When any revision to an approved Development and Production Plan 
is proposed by the lessee, the Regional Supervisor may approve the 
revision if it is determined that the revision is consistent with the 
protection of the marine, coastal, and human environments and will lead 
to greater recovery of oil and natural gas; will improve the efficiency, 
safety, and environmental protection of the recovery operation; is the 
only means available to avoid substantial economic hardship to the 
lessee; or is otherwise not inconsistent with the provisions of the Act.
    (r) Whenever the lessee fails to submit a Development and Production 
Plan in accordance with provisions of this section or fails to comply 
with an approved plan, the lease may be cancelled in accordance with 
sections 5 (c) and (d) of the Act and the implementing regulations in 
Secs. 250.12 and 256.77 of this chapter.
    (s) To ensure safety and protection of the environment and 
archaeological resources, the Regional Director may authorize or direct 
the lessee to conduct geological, geophysical, biological, 
archaeological, or other surveys or monitoring programs. The lessee 
shall provide the Regional Director, upon request, copies of any data 
obtained as a result of those surveys and monitoring programs.
    (t) The lessee may not drill any well until the District 
Supervisor's approval of an APD, filed in accordance with the 
requirements of Sec. 250.64 of this part, has been received. All APD's 
and applications to install platforms and structures, pipelines, and 
production equipment must conform to the activities described in detail 
in the approved Development and Production Plan and shall not be subject 
to a separate State coastal zone consistency review.
    (u) Nothing in this section or approved plans shall limit the 
lessee's responsibility to take appropriate measures to meet emergency 
situations. In

[[Page 249]]

such situations, the Regional Supervisor may approve or require 
departures from an approved Development and Production Plan.

[53 FR 10690, Apr. 1, 1988; 53 FR 26067, July 11, 1988, as amended at 54 
FR 50616, Dec. 8, 1989; 55 FR 47752, Nov. 15, 1990; 56 FR 32099, July 
15, 1991; 59 FR 53093, Oct. 21, 1994; 62 FR 13996, Mar. 25, 1997]



               Subpart C--Pollution Prevention and Control



Sec. 250.40  Pollution prevention.

    (a) During the exploration, development, production, and 
transportation of oil and gas or sulphur, the lessee shall take measures 
to prevent unauthorized discharge of pollutants into the offshore 
waters. The lessee shall not create conditions that will pose 
unreasonable risk to public health, life, property, aquatic life, 
wildlife, recreation, navigation, commercial fishing, or other uses of 
the ocean.
    (1) When pollution occurs as a result of operations conducted by or 
on behalf of the lessee and the pollution damages or threatens to damage 
life (including fish and other aquatic life), property, any mineral 
deposits (in areas leased or not leased), or the marine, coastal, or 
human environment, the control and removal of the pollution to the 
satisfaction of the District Supervisor shall be at the expense of the 
lessee. Immediate corrective action shall be taken in all cases where 
pollution has occurred. Corrective action shall be subject to 
modification when directed by the District Supervisor.
    (2) If the lessee fails to control and remove the pollution, the 
Director, in cooperation with other appropriate Agencies of Federal, 
State, and local governments, or in cooperation with the lessee, or 
both, shall have the right to control and remove the pollution at the 
lessee's expense. Such action shall not relieve the lessee of any 
responsibility provided for by law.
    (b)(1) The District Supervisor may restrict the rate of drilling 
fluid discharges or prescribe alternative discharge methods. The 
District Supervisor may also restrict the use of components which could 
cause unreasonable degradation to the marine environment. No petroleum-
based substances, including diesel fuel, may be added to the drilling 
mud system without prior approval of the District Supervisor.
    (2) Approval of the method of disposal of drill cuttings, sand, and 
other well solids shall be obtained from the District Supervisor.
    (3) All hydrocarbon-handling equipment for testing and production 
such as separators, tanks, and treaters shall be designed, installed, 
and operated to prevent pollution. Maintenance or repairs which are 
necessary to prevent pollution of offshore waters shall be undertaken 
immediately.
    (4) Curbs, gutters, drip pans, and drains shall be installed in deck 
areas in a manner necessary to collect all contaminants not authorized 
for discharge. Oil drainage shall be piped to a properly designed, 
operated, and maintained sump system which will automatically maintain 
the oil at a level sufficient to prevent discharge of oil into offshore 
waters. All gravity drains shall be equipped with a water trap or other 
means to prevent gas in the sump system from escaping through the 
drains. Sump piles shall not be used as processing devices to treat or 
skim liquids but may be used to collect treated-produced water, treated-
produced sand, or liquids from drip pans and deck drains and as a final 
trap for hydrocarbon liquids in the event of equipment upsets. 
Improperly designed, operated, or maintained sump piles which do not 
prevent the discharge of oil into offshore waters shall be replaced or 
repaired.
    (5) On artificial islands, all vessels containing hydrocarbons shall 
be placed inside an impervious berm or otherwise protected to contain 
spills. Drainage shall be directed away from the drilling rig to a sump. 
Drains and sumps shall be constructed to prevent seepage.
    (6) Disposal of equipment, cables, chains, containers, or other 
materials into offshore waters is prohibited.
    (c) Materials, equipment, tools, containers, and other items used in 
the Outer Continental Shelf (OCS) which are of such shape or 
configuration that they are likely to snag or damage fishing devices 
shall be handled and marked as follows:

[[Page 250]]

    (1) All loose material, small tools, and other small objects shall 
be kept in a suitable storage area or a marked container when not in use 
and in a marked container before transport over offshore waters;
    (2) All cable, chain, or wire segments shall be recovered after use 
and securely stored until suitable disposal is accomplished;
    (3) Skid-mounted equipment, portable containers, spools or reels, 
and drums shall be marked with the owner's name prior to use or 
transport over offshore waters; and
    (4) All markings must clearly identify the owner and must be durable 
enough to resist the effects of the environmental conditions to which 
they may be exposed.
    (d) Any of the items described in paragraph (c) of this section that 
are lost overboard shall be recorded on the facility's daily operations 
report, as appropriate, and reported to the District Supervisor.

[53 FR 10690, Apr. 1, 1988, as amended at 56 FR 32099, July 15, 1991]



Sec. 250.41  Inspection of facilities..

    (a) Drilling and production facilities shall be inspected daily or 
at intervals approved or prescribed by the District Supervisor to 
determine if pollution is occurring. Necessary maintenance or repairs 
shall be made immediately. Records of such inspections and repairs shall 
be maintained at the facility or at a nearby manned facility for 2 
years.

[53 FR 10690, Apr. 1, 1988, as amended at 62 FR 13996, Mar. 25, 1997]



Sec. 250.44  Definitions concerning air quality.

    For purposes of Secs. 250.45 and 250.46 of this part:
    Air pollutant means any combination of agents for which the 
Environmental Protection Agency (EPA) has established, pursuant to 
section 109 of the Clean Air Act, national primary or secondary ambient 
air quality standards.
    Attainment area means, for any air pollutant, an area which is shown 
by monitored data or which is calculated by air quality modeling (or 
other methods determined by the Administrator of EPA to be reliable) not 
to exceed any primary or secondary ambient air quality standards 
established by EPA.
    Best available control technology (BACT) means an emission 
limitation based on the maximum degree of reduction for each air 
pollutant subject to regulation, taking into account energy, 
environmental and economic impacts, and other costs. The BACT shall be 
verified on a case-by-case basis by the Regional Supervisor and may 
include reductions achieved through the application of processes, 
systems, and techniques for the control of each air pollutant.
    Emission offsets means emission reductions obtained from facilities, 
either onshore or offshore, other than the facility or facilities 
covered by the proposed Exploration Plan or Development and Production 
Plan.
    Existing facility is an OCS facility described in an Exploration 
Plan or a Development and Production Plan submitted or approved prior to 
June 2, 1980.
    Facility means any installation or device permanently or temporarily 
attached to the seabed which is used for exploration, development, and 
production activities for oil, gas, or sulphur and which emits or has 
the potential to emit any air pollutant from one or more sources. All 
equipment directly associated with the installation or device shall be 
considered part of a single facility if the equipment is dependent on, 
or affects the processes of, the installation or device. During 
production, multiple installations or devices will be considered to be a 
single facility if the installations or devices are directly related to 
the production of oil, gas, or sulphur at a single site. Any vessel used 
to transfer production from an offshore facility shall be considered 
part of the facility while physically attached to it.
    Nonattainment area means, for any air pollutant, an area which is 
shown by monitored data or which is calculated by air quality modeling 
(or other methods determined by the Administrator of EPA to be reliable) 
to exceed any primary or secondary ambient air quality standard 
established by EPA.
    Projected emissions means emissions, either controlled or 
uncontrolled, from a source(s).

[[Page 251]]

    Source means an emission point. Several sources may be included 
within a single facility.
    Temporary facility means activities associated with the construction 
of platforms offshore or with facilities related to exploration for or 
development of offshore oil and gas resources which are conducted in one 
location for less than 3 years.
    Volatile organic compound (VOC) means any organic compound which is 
emitted to the atmosphere as a vapor. The unreactive compounds are 
exempt from the above definition.

[53 FR 10690, Apr. 1, 1988, as amended at 56 FR 32100, July 15, 1991]



Sec. 250.45  Facilities described in a new or revised Exploration Plan or Development and Production Plan.

    (a) New plans. All Exploration Plans and Development and Production 
Plans shall include the information required to make the necessary 
findings under paragraphs (d) through (i) of this section, and the 
lessee shall comply with the requirements of this section as necessary.
    (b) Applicability of Sec. 250.45 to existing facilities. (1) The 
Regional Supervisor may review any Exploration Plan or Development and 
Production Plan to determine whether any facility described in the plan 
should be subject to review under this section and has the potential to 
significantly affect the air quality of an onshore area. To make these 
decisions, the Regional Supervisor shall consider the distance of the 
facility from shore, the size of the facility, the number of sources 
planned for the facility and their operational status, and the air 
quality status of the onshore area.
    (2) For a facility identified by the Regional Supervisor in 
paragraph (b)(1) of this section, the Regional Supervisor shall require 
the lessee to refer to the information required in Sec. 250.33(b)(19) or 
Sec. 250.34(b)(12) of this part and to submit only that information 
required to make the necessary findings under paragraphs (d) through (i) 
of this section. The lessee shall submit this information within 120 
days of the Regional Supervisor's determination or within a longer 
period of time at the discretion of the Regional Supervisor. The lessee 
shall comply with the requirements of this section as necessary.
    (c) Revised facilities. All revised Exploration Plans and 
Development and Production Plans shall include the information required 
to make the necessary findings under paragraphs (d) through (i) of this 
section. The lessee shall comply with the requirements of this section 
as necessary.
    (d) Exemption formulas. To determine whether a facility described in 
a new, modified, or revised Exploration Plan or Development and 
Production Plan is exempt from further air quality review, the lessee 
shall use the highest annual-total amount of emissions from the facility 
for each air pollutant calculated in Sec. 250.33(b)(19)(i)(A) or 
Sec. 250.34(b)(12)(i)(A) of this part and compare these emissions to the 
emission exemption amount ``E'' for each air pollutant calculated using 
the following formulas: E=3400D2/3 for carbon monoxide (CO); 
and E=33.3D for total suspended particulates (TSP), sulphur dioxide 
(SO2), nitrogen oxides (NOx), and VOC (where E is 
the emission exemption amount expressed in tons per year, and D is the 
distance of the proposed facility from the closest onshore area of a 
State expressed in statute miles). If the amount of these projected 
emissions is less than or equal to the emission exemption amount ``E'' 
for the air pollutant, the facility is exempt from further air quality 
review required under paragraphs (e) through (i) of this section.
    (e) Significance levels. For a facility not exempt under paragraph 
(d) of this section for air pollutants other than VOC, the lessee shall 
use an approved air quality model to determine whether the projected 
emissions of those air pollutants from the facility result in an onshore 
ambient air concentration above the following significance levels:

    Significance Levels: Air pollutant concentrations (g/m3)   
------------------------------------------------------------------------
                                               Averaging time (hours)   
               Air pollutant               -----------------------------
                                             Annual  24   8    3     1  
------------------------------------------------------------------------
SO2.......................................        1   5  ...  25  ......
TSP.......................................        1   5  ...  ..  ......
NO2.......................................        1  ..  ...  ..  ......
CO........................................  .......  ..  500  ..   2,000
------------------------------------------------------------------------


[[Page 252]]

    (f) Significance determinations. (1) The projected emissions of any 
air pollutant other than VOC from any facility which result in an 
onshore ambient air concentration above the significance level 
determined under paragraph (e) of this section for that air pollutant, 
shall be deemed to significantly affect the air quality of the onshore 
area for that air pollutant.
    (2) The projected emissions of VOC from any facility which is not 
exempt under paragraph (d) of this section for that air pollutant shall 
be deemed to significantly affect the air quality of the onshore area 
for VOC.
    (g) Controls required. (1) The projected emissions of any air 
pollutant other than VOC from any facility, except a temporary facility, 
which significantly affect the quality of a nonattainment area, shall be 
fully reduced. This shall be done through the application of BACT and, 
if additional reductions are necessary, through the application of 
additional emission controls or through the acquisition of offshore or 
onshore offsets.
    (2) The projected emissions of any air pollutant other than VOC from 
any facility which significantly affect the air quality of an attainment 
or unclassifiable area shall be reduced through the application of BACT.
    (i) Except for temporary facilities, the lessee also shall use an 
approved air quality model to determine whether the emissions of TSP or 
SO2 that remain after the application of BACT cause the 
following maximum allowable increases over the baseline concentrations 
established in 40 CFR 52.21 to be exceeded in the attainment or 
unclassifiable area:

        Maximum allowable concentration increases (g/m3)       
------------------------------------------------------------------------
                                                    Averaging times     
                                             ---------------------------
                Air pollutant                  Annual   24-hour   3-hour
                                              mean \1\  maximum  maximum
------------------------------------------------------------------------
Class I:                                                                
  TSP.......................................         5       10  .......
  SO2.......................................         2        5       25
Class II:                                                               
  TSP.......................................        19       37  .......
  SO2.......................................        20       91      512
Class III:                                                              
  TSP.......................................        37       75  .......
  SO2.......................................        40      182     700 
------------------------------------------------------------------------
\1\ For TSP--geometric; For SO2--arithmetric.                           

No concentration of an air pollutant shall exceed the concentration 
permitted under the national secondary ambient air quality standard or 
the concentration permitted under the national primary air quality 
standard, whichever concentration is lowest for the air pollutant for 
the period of exposure. For any period other than the annual period, the 
applicable maximum allowable increase may be exceeded during one such 
period per year at any one onshore location.
    (ii) If the maximum allowable increases are exceeded, the lessee 
shall apply whatever additional emission controls are necessary to 
reduce or offset the remaining emissions of TSP or SO2 so 
that concentrations in the onshore ambient air of an attainment or 
unclassifiable area do not exceed the maximum allowable increases.
    (3)(i) The projected emissions of VOC from any facility, except a 
temporary facility, which significantly affect the onshore air quality 
of a nonattainment area shall be fully reduced. This shall be done 
through the application of BACT and, if additional reductions are 
necessary, through the application of additional emission controls or 
through the acquisition of offshore or onshore offsets.
    (ii) The projected emissions of VOC from any facility which 
significantly affect the onshore air quality of an attainment area shall 
be reduced through the application of BACT.
    (4)(i) If projected emissions from a facility significantly affect 
the onshore air quality of both a nonattainment and an attainment or 
unclassifiable area, the regulatory requirements applicable to projected 
emissions significantly affecting a nonattainment area shall apply.
    (ii) If projected emissions from a facility significantly affect the 
onshore air quality of more than one class of

[[Page 253]]

attainment area, the lessee must reduce projected emissions to meet the 
maximum allowable increases specified for each class in paragraph 
(g)(2)(i) of this section.
    (h) Controls required on temporary facilities. The lessee shall 
apply BACT to reduce projected emissions of any air pollutant from a 
temporary facility which significantly affect the air quality of an 
onshore area of a State.
    (i) Emission offsets. When emission offsets are to be obtained, the 
lessee must demonstrate that the offsets are equivalent in nature and 
quantity to the projected emissions that must be reduced after the 
application of BACT; a binding commitment exists between the lessee and 
the owner or owners of the source or sources; the appropriate air 
quality control jurisdiction has been notified of the need to revise the 
State Implementation Plan to include the information regarding the 
offsets; and the required offsets come from sources which affect the air 
quality of the area significantly affected by the lessee's offshore 
operations.
    (j) Review of facilities with emissions below the exemption amount. 
If, during the review of a new, modified, or revised Exploration Plan or 
Development and Production Plan, the Regional Supervisor determines or 
an affected State submits information to the Regional Supervisor which 
demonstrates, in the judgment of the Regional Supervisor, that projected 
emissions from an otherwise exempt facility will, either individually or 
in combination with other facilities in the area, significantly affect 
the air quality of an onshore area, then the Regional Supervisor shall 
require the lessee to submit additional information to determine whether 
emission control measures are necessary. The lessee shall be given the 
opportunity to present information to the Regional Supervisor which 
demonstrates that the exempt facility is not significantly affecting the 
air quality of an onshore area of the State.
    (k) Emission monitoring requirements. The lessee shall monitor, in a 
manner approved or prescribed by the Regional Supervisor, emissions from 
the facility. The lessee shall submit this information monthly in a 
manner and form approved or prescribed by the Regional Supervisor.
    (l) Collection of meteorological data. The Regional Supervisor may 
require the lessee to collect, for a period of time and in a manner 
approved or prescribed by the Regional Supervisor, and submit 
meteorological data from a facility.

[53 FR 10690, Apr. 1, 1988; 53 FR 19856, May 31, 1988; 53 FR 26067, July 
11, 1988]



Sec. 250.46  Existing facilities.

    (a) Process leading to review of an existing facility. (1) An 
affected State may request that the Regional Supervisor supply basic 
emission data from existing facilities when such data are needed for the 
updating of the State's emission inventory. In submitting the request, 
the State must demonstrate that similar offshore and onshore facilities 
in areas under the State's jurisdiction are also included in the 
emission inventory.
    (2) The Regional Supervisor may require lessees of existing 
facilities to submit basic emission data to a State submitting a request 
under paragraph (a)(1) of this section.
    (3) The State submitting a request under paragraph (a)(1) of this 
section may submit information from its emission inventory which 
indicates that emissions from existing facilities may be significantly 
affecting the air quality of the onshore area of the State. The lessee 
shall be given the opportunity to present information to the Regional 
Supervisor which demonstrates that the facility is not significantly 
affecting the air quality of the State.
    (4) The Regional Supervisor shall evaluate the information submitted 
under paragraph (a)(3) of this section and shall determine, based on the 
basic emission data, available meteorological data, and the distance of 
the facility or facilities from the onshore area, whether any existing 
facility has the potential to significantly affect the air quality of 
the onshore area of the State.
    (5) If the Regional Supervisor determines that no existing facility 
has the potential to significantly affect the air quality of the onshore 
area of the State

[[Page 254]]

submitting information under paragraph (a)(3) of this section, the 
Regional Supervisor shall notify the State of and explain the reasons 
for this finding.
    (6) If the Regional Supervisor determines that an existing facility 
has the potential to significantly affect the air quality of an onshore 
area of the State submitting information under paragraph (a)(3) of this 
section, the Regional Supervisor shall require the lessee to refer to 
the information requirements under Sec. 250.33(b)(19) or 250.34(b)(12) 
of this part and submit only that information required to make the 
necessary findings under paragraphs (b) through (e) of this section. The 
lessee shall submit this information within 120 days of the Regional 
Supervisor's determination or within a longer period of time at the 
discretion of the Regional Supervisor. The lessee shall comply with the 
requirements of this section as necessary.
    (b) Exemption formulas. To determine whether an existing facility is 
exempt from further air quality review, the lessee shall use the highest 
annual total amount of emissions from the facility for each air 
pollutant calculated in Sec. 250.33(b)(19)(i)(A) or 250.34(b)(12)(i)(A) 
of this part and compare these emissions to the emission exemption 
amount ``E'' for each air pollutant calculated using the following 
formulas: E=3400D2/3 for CO; and E=33.3D for TSP, 
SO2, NOX, and VOC (where E is the emission 
exemption amount expressed in tons per year, and D is the distance of 
the facility from the closest onshore area of the State expressed in 
statute miles). If the amount of projected emissions is less than or 
equal to the emission exemption amount ``E'' for the air pollutant, the 
facility is exempt for that air pollutant from further air quality 
review required under paragraphs (c) through (e) of this section.
    (c) Significance levels. For a facility not exempt under paragraph 
(b) of this section for air pollutants other than VOC, the lessee shall 
use an approved air quality model to determine whether projected 
emissions of those air pollutants from the facility result in an onshore 
ambient air concentration above the following significance levels:

  Significance Levels: Air Pollutant Concentrations (G/M\3\)   
------------------------------------------------------------------------
                                               Averaging time (hours)   
               Air pollutant               -----------------------------
                                             Annual  24   8    3     1  
------------------------------------------------------------------------
SO2.......................................        1   5  ...  25  ......
TSP.......................................        1   5  ...  ..  ......
NO2.......................................        1  ..  ...  ..  ......
CO........................................  .......  ..  500  ..   2,000
------------------------------------------------------------------------

    (d) Significance determinations. (1) The projected emissions of any 
air pollutant other than VOC from any facility which result in an 
onshore ambient air concentration above the significance levels 
determined under paragraph (c) of this section for that air pollutant 
shall be deemed to significantly affect the air quality of the onshore 
area for that air pollutant.
    (2) The projected emissions of VOC from any facility which is not 
exempt under paragraph (b) of this section for that air pollutant shall 
be deemed to significantly affect the air quality of the onshore area 
for VOC.
    (e) Controls required. (1) The projected emissions of any air 
pollutant which significantly affect the air quality of an onshore area 
shall be reduced through the application of BACT.
    (2) The lessee shall submit a compliance schedule for the 
application of BACT. If it is necessary to cease operations to allow for 
the installation of emission controls, the lessee may apply for a 
suspension of operations under the provisions of Sec. 250.10 of this 
part.
    (f) Review of facilities with emissions below the exemption amount. 
If, during the review of the information required under paragraph (a)(6) 
of this section, the Regional Supervisor determines or an affected State 
submits information to the Regional Supervisor which demonstrates, in 
the judgment of the Regional Supervisor, that projected emissions from 
an otherwise exempt facility will, either individually or in combination 
with other facilities in the area, significantly affect the air quality 
of an onshore area, then the Regional Supervisor shall require the 
lessee to submit additional information to determine whether control 
measures are necessary. The lessee shall be given the opportunity to 
present information to the Regional Supervisor which demonstrates that 
the exempt facility is

[[Page 255]]

not significantly affecting the air quality of an onshore area of the 
State.
    (g) Emission monitoring requirements. The lessee shall monitor, in a 
manner approved or prescribed by the Regional Supervisor, emissions from 
the facility following the installation of emission controls. The lessee 
shall submit this information monthly in a manner and form approved or 
prescribed by the Regional Supervisor.
    (h) Collection of meteorological data. The Regional Supervisor may 
require the lessee to collect, for a period of time and in a manner 
approved or prescribed by the Regional Supervisor, and submit 
meteorological data from a facility.

[53 FR 10690, Apr. 1, 1988; 53 FR 26067, July 11, 1988]



               Subpart D--Oil and Gas Drilling Operations



Sec. 250.50   Control of wells.

    The lessee shall take necessary precautions to keep its wells under 
control at all times. The lessee shall utilize the best available and 
safest drilling technology in order to enhance the evaluation of 
conditions of abnormal pressure and to minimize the potential for the 
well to flow or kick. The lessee shall utilize personnel who are trained 
and competent and shall utilize and maintain equipment and materials 
necessary to assure the safety and protection of personnel, equipment, 
natural resources, and the environment.



Sec. 250.51   General requirements.

    (a) Fitness of drilling unit. (1) Drilling units shall be capable of 
withstanding the oceanographic, meteorological, and ice conditions for 
the proposed season and location of operations.
    (2) Prior to commencing operation, drilling units shall be available 
for complete inspection by the District Supervisor.
    (3) The lessee shall provide information and data on the fitness of 
the drilling unit to perform the proposed drilling operation. The 
information shall be submitted with or prior to the submission of Form 
MMS-123, Application for Permit to Drill (APD), in accordance with 
Sec. 250.64. The District Supervisor may require the submission of a 
third-party review of the design of drilling units which are of a unique 
design and/or not proven for use in the proposed environment if the 
District Supervisor believes that the information submitted by the 
lessee is insufficient to demonstrate suitability of the unit for use at 
the proposed drill site. A design Certified Verification Agent approved 
in accordance with Sec. 250.133 of this part shall be used for any 
required third-party review.
    (b) Drilling unit safety devices. (1) No later than May 31, 1989, 
all drilling units shall be equipped with a safety device which is 
designed to prevent the traveling block from striking the crown block. 
The device shall be checked for proper operation weekly and after each 
drill-line slipping operation. The results of the operational check 
shall be entered in the driller's report.
    (2) No later than May 31, 1989, diesel-engine air intakes shall be 
equipped with a device to shut down the diesel engine in the event of 
runaway. Diesel engines which are continuously attended shall be 
equipped with either remote operated manual or automatic shutdown 
devices. Diesel engines which are not continuously attended shall be 
equipped with automatic shutdown devices.
    (c) Oceanographic, meteorological, and drilling unit performance 
data. Where such information is not otherwise readily available, upon 
request of the District Supervisor, lessees shall collect and report 
oceanographic, meteorological, and drilling unit performance data, and 
monitor ice conditions, if applicable, during the period of operations. 
The type of information to be collected and reported will be determined 
by the District Supervisor in the interests of safe conduct of 
operations and the structural integrity of the drilling unit.
    (d) Foundation requirements. When the lessee fails to provide 
sufficient information pursuant to Secs. 250.33 and 250.34 of this part 
to support a determination that the seafloor is capable of supporting a 
specific bottom-founded drilling unit under the site-specific soil and 
oceanographic conditions, the District Supervisor may require that 
additional

[[Page 256]]

surveys and soil borings be performed and the results be submitted for 
review and evaluation by the District Supervisor before approval is 
granted for commencing drilling operations.
    (e) Tests, surveys, and samples. (1) The lessee shall conduct tests, 
obtain well and mud logs or surveys, and take samples to determine the 
reservoir energy; the presence, quantity, and quality of oil, gas, 
sulphur, and water; and the amount of pressure in the formations 
penetrated. The lessee shall take formation samples or cores to 
determine the identity, fluid content, and characteristics of any 
penetrated formation in accordance with requirements approved or 
prescribed by the District Supervisor.
    (2) Inclinational surveys shall be obtained on all vertical wells at 
intervals not exceeding 1,000 feet during the normal course of drilling. 
Directional surveys giving both inclination and azimuth shall be 
obtained on all directional wells at intervals not exceeding 500 feet 
during the normal course of drilling and at intervals not exceeding 100 
feet in all portions of the hole when angle-changes are planned.
    (3) On both vertical and directionally drilled wells, directional 
surveys giving both inclination and azimuth shall be obtained at 
intervals not exceeding 500 feet prior to or upon setting surface or 
intermediate casing, liners, and at total depth. Composite directional 
surveys shall be prepared with the interval shown from the bottom of the 
conductor casing or, in the absence of conductor casing, from the bottom 
of the drive or structural casing to total depth. In calculating all 
surveys, a correction from the true north to Universal-Transverse-
Mercator-Grid-north or Lambert-Grid-north shall be made after making the 
magnetic-to-true-north correction. A composite dipmeter directional 
survey or a composite measurement-while-drilling (MWD) directional 
survey including a listing of the directionally computed inclinations 
and azimuths on a well classified as vertical will be acceptable as 
fulfilling the applicable requirements of this paragraph. In the event a 
composite MWD survey is run, a multishot survey shall be obtained at 
each casing point in order to confirm the MWD results.
    (4) Wells are classified as vertical if the calculated average of 
inclination readings weighted by the respective interval lengths between 
readings from surface to drilled depth does not exceed 3 degrees from 
the vertical. When the calculated average inclination readings weighted 
by the length of the respective interval between readings from the 
surface to drilled depth exceeds 3 degrees, the well is classified as 
directional.
    (5) The Regional Supervisor at the request of a holder of an 
adjoining lease may, for the protection of correlative rights, furnish a 
copy of the directional survey for a well drilled within 500 feet of the 
adjacent lease to that leaseholder.
    (f) Fixed drilling platforms. Applications for installation of fixed 
drilling platforms or structures, including artificial islands, shall be 
submitted in accordance with the provisions of subpart I, Platforms and 
Structures, of this part. Mobile drilling units which have their jacking 
equipment removed or have been otherwise immobilized are classified as 
fixed drilling platforms.
    (g) Equipment movement. The movement of drilling rigs and related 
equipment on and off an offshore platform or from well to well on the 
same offshore platform, including rigging up and rigging down, shall be 
conducted in a safe manner. All wells in the same well-bay which are 
capable of producing hydrocarbons shall be shut in below the surface 
with a pump-through-type tubing plug and at the surface with a closed 
master valve prior to moving such rigs and related equipment, unless 
otherwise approved by the District Supervisor. A closed surface-
controlled subsurface safety valve of the pump-through-type may be used 
in lieu of the pump-through-type tubing plug, provided that the surface 
control has been locked out.
    (h) Emergency shutdown system. When drilling operations are 
conducted on a platform where there are other hydrocarbon-producing 
wells or other hydrocarbon flow, an Emergency Shutdown

[[Page 257]]

System (ESD) manually controlled station shall be installed near the 
driller's console.

[53 FR 10690, Apr. 1, 1988; 53 FR 12227, Apr. 13, 1988, as amended at 54 
FR 50616, Dec. 8, 1989; 55 FR 47752, Nov. 15, 1990; 58 FR 49928, Sept. 
24, 1993]



Sec. 250.52  Welding and burning practices and procedures.

    (a) General requirements. (1) For the purpose of this rule, the 
terms welding and burning are defined to include arc or fuel-gas 
(acetylene or other gas) cutting and arc or fuel-gas welding.
    (2) All offshore welding and burning shall be minimized by onshore 
fabrication when feasible. The requirements set forth in paragraphs (b), 
(c), and (d) of this section shall be applicable to any welding or 
burning practice or procedure performed on the following:
    (i) An offshore mobile drilling unit during the drilling mode;
    (ii) A mobile workover unit during any drilling, completion, 
recompletion, remedial, repair, stimulation, or other workover activity;
    (iii) A platform, structure, artificial island, or other 
installation during any drilling, well-completion, well-workover, or 
production operation; and
    (iv) A platform, structure, artificial island, or other installation 
which contains a well open to a hydrocarbon-bearing zone.
    (3) All water-discharge-point sources from hydrocarbon-handling 
vessels shall be monitored in order to stop welding and burning 
operations in case flammable fluids are discharged as a result of 
equipment upset or malfunction.
    (4) Equipment containing hydrocarbons or other flammable substances 
shall be relocated at least 35 feet horizontally from the work site. 
Similar equipment located at a lower elevation where slag, sparks, or 
other burning materials could fall shall be relocated at least 35 feet 
from the point of impact. If relocation is impractical, either the 
equipment shall be protected with flame-proofed covers or otherwise 
shielded with metal or fire-resistant guards or curtains, or the 
contents shall have been rendered inert.
    (b) Welding, burning, and hot tapping plan. Each lessee shall submit 
for approval by the District Supervisor a ``Welding, Burning, and Hot 
Tapping Safe Practices and Procedures Plan'' prior to beginning the 
first drilling and/or production operations on a lease. The plan shall 
include the qualification standards or requirements for personnel who 
the lessee will authorize to conduct welding, burning, and hot tapping 
operations and the methods by which the lessee will assure that only 
trained personnel who meet such standards or requirements are utilized. 
A copy of this plan and approval letter shall be available on the 
facility where the welding is conducted. Any person designated as a 
welding supervisor shall be thoroughly familiar with this plan. An 
approved plan is required prior to conducting any welding, burning, or 
hot tapping operation. All welding and burning equipment shall be 
inspected by the welding supervisor or the lessee's designated person in 
charge prior to beginning any welding, burning, or hot tapping. All 
engine-driven welding machines shall be equipped with spark arrestors 
and drip pans. Welding leads shall be completely insulated and in good 
condition, oxygen and fuel gas bottles shall be secured in a safe place, 
and leak-free hoses shall be equipped with proper fittings, gauges, and 
regulators.
    (c) Designated safe-welding and burning areas. The lessee may 
establish and designate areas determined to be safe-welding areas. These 
designated areas shall be identified in the plan, and a drawing showing 
the location of these areas shall be maintained on the facility.
    (d) Undesignated welding and burning areas. All welding and burning, 
which cannot be done in an approved safe-welding area, shall be 
performed in compliance with the following:
    (1) Prior to the commencement of any of these operations, the 
lessee's designated person in charge at the installation shall inspect 
the qualifications of the welder(s) to assure that the welder(s) is 
properly qualified in accordance with the approved qualification 
standards or requirements for welders. The designated person in charge 
and the welder(s) shall inspect the work area and area(s) at elevations 
below the work area where slag,

[[Page 258]]

sparks, or other hot materials could fall for potential fire and 
explosion hazards. After it has been determined that it is safe to 
proceed with the welding and burning operation, the designated person-
in-charge shall issue a written authorization for the work.
    (2) During these welding or burning operations, one or more persons 
shall be designated as a fire watch. The person(s) assigned as a fire 
watch shall have no other duties while actual welding or burning 
operations are in progress. If the operation is to be in an area which 
is not equipped with a gas detector, the fire watch shall also maintain 
a continuous surveillance with a portable gas detector during the 
welding and burning operation. The fire watch shall remain on duty for a 
period of 30 minutes after welding or burning operations have been 
completed.
    (3) Prior to any of these operations, the fire watch shall have in 
their possession firefighting equipment in a usable condition.
    (4) No welding or burning operation, other than approved hot 
tapping, shall be done on piping, containers, tanks, or other vessels 
which have contained a flammable substance unless the contents have been 
rendered inert and are determined to be safe for welding or burning by 
the designated person in charge.
    (5) If drilling, well-completion, well-workover, or wireline 
operations are in progress, welding operations in other than approved 
safe-welding areas shall not be conducted unless the well(s) in the area 
where drilling, well-completion, well-workover, or wireline operations 
are in progress contain noncombustible fluids and the entry of formation 
hydrocarbons into the wellbore is precluded.
    (6) If welding or burning operations are conducted in or within 10 
feet of a well-bay or production area, all producing wells in the well-
bay or production area shall be shut in at the surface safety valve.



Sec. 250.53  Electrical equipment.

    The following requirements shall be applicable to all electrical 
equipment on all platforms, artificial islands, fixed structures, and 
their facilities:
    (a) All engines with electrical ignition systems shall be equipped 
with a low-tension ignition system designed and maintained to minimize 
the release of sufficient electrical energy to cause ignition of an 
external, combustible mixture or substance.
    (b) All areas shall be classified in accordance with API RP 500, 
Recommended Practice for Classification of Locations for Electrical 
Installations at Petroleum Facilities.
    (c) All electrical installations shall be made in accordance with 
API RP 14F, Design and Installation of Electrical Systems for Offshore 
Production Platforms, except sections 7.4, Emergency Lighting and 9.4, 
Aids to Navigation Equipment.
    (d) Maintenance of electrical systems shall be by personnel who are 
trained and experienced with the area classifications, distribution 
system, performance characteristics and operation of the equipment, and 
with the hazards involved.

[53 FR 10690, Apr. 1, 1988, as amended at 54 FR 50616, Dec. 8, 1989; 61 
FR 60024, Nov. 26, 1996]



Sec. 250.54  Well casing and cementing.

    (a) General requirements. (1) For the purpose of this subpart, the 
casing strings in order of normal installation are as follows:
    (i) Drive or structural,
    (ii) Conductor,
    (iii) Surface,
    (iv) Intermediate, and
    (v) Production casing.
    (2) The lessee shall case and cement all wells with a sufficient 
number of strings of casing and quantity and quality of cement in a 
manner necessary to prevent release of fluids from any stratum through 
the wellbore (directly or indirectly) into offshore waters, prevent 
communication between separate hydrocarbon-bearing strata, protect 
freshwater aquifers from contamination, support unconsolidated 
sediments, and otherwise provide a means of control of the formation 
pressures and fluids. Cement composition, placement techniques, and 
waiting time shall be designed and conducted so that the cement in place 
behind the bottom 500 feet of casing or total length of annular cement 
fill, if less,

[[Page 259]]

attains a minimum compressive strength of 500 pounds per square inch 
(psi). Cement placed across permafrost zones shall be designed to set 
before freezing and have a low heat of hydration.
    (3) The lessee shall install casing designed to withstand the 
anticipated stresses imposed by tensile, compressive, and buckling 
loads; burst and collapse pressures; thermal effects; and combinations 
thereof. Safety factors in the casing program design shall be of 
sufficient magnitude to provide well control during drilling and to 
assure safe operations for the life of the well. Any portion of an 
annulus opposite a permafrost zone which is not protected by cement 
shall be filled with a liquid which has a freezing point below the 
minimum permafrost temperature to prevent internal freezeback and which 
is treated to minimize corrosion.
    (4) In cases where cement has filled the annular space back to the 
mud line, the cement may be washed out or displaced to a depth not 
exceeding the depth of the structural casing shoe to facilitate casing 
removal upon well abandonment if the District Supervisor determines that 
subsurface protection against damage to freshwater aquifers and 
permafrost zones and against damage caused by adverse loads, pressures, 
and fluid flows is not jeopardized.
    (5) If there are indications of inadequate cementing (such as lost 
returns, cement channeling, or mechanical failure of equipment), the 
lessee shall evaluate the adequacy of the cementing operations by 
pressure testing the casing shoe, running a cement bond log, running a 
temperature survey, or a combination thereof before continuing 
operations. If the evaluation indicates inadequate cementing, the lessee 
shall re-cement or take other remedial actions as approved by the 
District Supervisor.
    (6) A pressure-integrity test shall be run below the surface casing, 
the intermediate casing(s), and liner(s) used as intermediate casing(s). 
The District Supervisor may require a pressure-integrity test to be run 
at the conductor casing shoe due to local geologic conditions or planned 
casing setting depths. Pressure-integrity tests shall be made after 
drilling new hole below the casing shoe and before drilling more than 50 
feet of new hole below a respective casing string. These tests shall be 
conducted either by testing to formation leak-off or by testing to a 
predetermined equivalent mud weight as specified in the approved APD. A 
safe margin, as approved by the District Supervisor, shall be maintained 
between the mud weight in use and the equivalent mud weight at the 
casing shoe as determined in the pressure-integrity test. Drilling 
operations shall be suspended when the safe margin is not maintained. 
Pressure-integrity and pore-pressure test results and related hole-
behavior observations, such as gas-cut mud and well kicks made during 
the course of drilling, shall be used in adjusting the drilling mud 
program and the approved setting depth of the next casing string. The 
results of all tests and of hole-behavior observations made during the 
course of drilling related to formation integrity and pore pressure 
shall be recorded in the driller's report.
    (b) Drive or structural casing. This casing shall be set by driving, 
jetting, or drilling to a minimum depth as may be prescribed or approved 
by the District Supervisor, in order to support unconsolidated deposits 
and to provide hole stability for initial drilling operations. If this 
portion of the hole is drilled, a quantity of cement sufficient to fill 
the annular space back to the mud line shall be used.
    (c) Conductor and surface casing requirements. (1) Conductor and 
surface casing setting depths. Conductor and surface casing design and 
setting depths shall be based upon relevant engineering and geologic 
factors including the presence or absence of hydrocarbons, potential 
hazards, and water depths. The approved casing setting depths may be 
adjusted when the change is approved by the District Supervisor to 
permit the casing shoe to be set in a competent formation or below 
formations which should be isolated from the wellbore by casing for 
safer drilling operations. However, the conductor casing shall be set 
immediately prior to drilling into formations known to contain oil or 
gas or, if the presence of oil or gas is unknown, upon encountering a 
formation containing oil or gas. Upon encountering

[[Page 260]]

unexpected formation pressures, the lessee shall submit a revised casing 
program to the District Supervisor for approval. The District Supervisor 
may permit a lessee to drill a well without setting conductor casing 
provided the information from approved logging and mud-monitoring 
programs for wells previously drilled in the immediate vacinity combined 
with other available geologic data are sufficient to demonstrate the 
absence of shallow hydrocarbons or hazards.
    (2) Conductor casing cementing requirements. Conductor casing shall 
be cemented with a quantity of cement that fills the calculated annular 
space back to the mud line except as applicable to the bottom of an 
excavation (glory hole) or to the surface of an artificial island. 
Cement fill in annular spaces shall be verified by the observation of 
cement returns. In the event that observation of cement returns is not 
feasible, additional quantities of cement shall be used to assure fill 
to the mud line.
    (3) Surface casing cementing requirements. (i) Surface casing shall 
be cemented with a quantity of cement that fills the calculated annular 
space to at least 200 feet inside the conductor casing. When geologic 
conditions such as near-surface fractures and faulting exist, surface 
casing shall be cemented with a quantity of cement that fills the 
calculated annular space to the mud line, or as approved or prescribed 
by the District Supervisor.
    (ii) For floating drilling operations, a lesser volume of cement may 
be used to prevent sealing the annular space between the conductor 
casing and surface casing if the District Supervisor determines that the 
uncemented space is necessary to provide protection from burst and 
collapse pressures which may be applied inadvertently to the annulus 
between casings during blowout preventer (BOP) testing operations. Any 
annular space open to the drilled hole shall be sealed in accordance 
with the requirements for abandonment in subpart G, Abandonment of 
Wells, of this part.
    (d) Intermediate casing requirements. (1) Intermediate casing 
string(s) shall be set for protection when geologic characteristics or 
wellbore conditions, as anticipated or as encountered, so indicate.
    (2) Quantities of cement that cover and isolate all hydrocarbon-
bearing zones in the well and isolate abnormal pressure intervals from 
normal pressure intervals shall be used. This requirement for isolation 
may be satisfied by squeeze cementing prior to completion, suspension of 
operations, or abandonment, whichever occurs first. Sufficient cement 
shall be used to provide annular fill-up to a minimum of 500 feet above 
the zones to be isolated or 500 feet above the casing shoe in wells 
where zonal coverage is not required.
    (3) If a liner is to be used as an intermediate string below a 
surface casing string, it shall be lapped a minimum of 100 feet into the 
previous casing string and cemented as required for intermediate casing. 
When a liner is to be used as production casing below a surface casing 
string, it shall be extended to the surface and cemented to avoid 
surface casing being used as production casing.
    (e) Production casing requirements. (1) Production casing shall be 
cemented to cover or isolate all zones above the shoe which contain 
hydrocarbons; but in any case, a volume sufficient to fill the annular 
space at least 500 feet above the uppermost hydrocarbon-bearing zone 
shall be used.
    (2) When a liner is to be used as production casing below 
intermediate casing, it shall be lapped a minimum of 100 feet into the 
previous casing string and cemented as required for the production 
casing.



Sec. 250.55  Pressure testing of casing.

    (a) Prior to drilling the plug after cementing and in the cases of 
plugs in production casing strings and liners not planned to be 
subsequently drilled out, all casings, except the drive or structural 
casing, shall be pressure tested to 70 percent of the minimum internal-
yield pressure of the casing or as otherwise approved or required by the 
District Supervisor. If the pressure declines more than 10 percent in 30 
minutes or if there is another indication of a leak, the casing shall be 
recemented, repaired, or an additional casing string run and the casing 
pressure tested

[[Page 261]]

again. Additional remedial actions shall be taken until a satisfactory 
pressure test is obtained. The results of all casing pressure tests 
shall be recorded in the driller's report.
    (b) Each production liner lap shall be tested to a minimum of 500 
psi above formation fracture pressure at the shoe of the casing into 
which the liner is lapped, or as otherwise approved or required by the 
District Supervisor. The drilling liner-lap test pressure shall be equal 
to or exceed the pressure that will be encountered at the liner lap when 
conducting the planned pressure-integrity test below the liner shoe. The 
test results shall be recorded on the driller's report. If the test 
indicates an improper seal, remedial action shall be taken which 
provides a proper seal as demonstrated by a satisfactory pressure test.
    (c) In the event of prolonged drill-pipe rotation within a casing 
string run to the surface or extended operations such as milling, 
fishing, jarring, washing over, and other operations which could damage 
the casing, the casing shall be pressure tested or evaluated by a 
logging technique such as a caliper log every 30 days. The evaluation 
results shall be submitted to the District Supervisor with a 
determination of effects of operations on the integrity of the casing 
for continued service during drilling operations and over the producing 
life of the well. If the integrity of the casing in the well has 
deteriorated to an unsafe level, remedial operations shall be conducted 
or additional casing set in accordance with a plan approved by the 
District Supervisor prior to continuing drilling operations.
    (d) After cementing any string of casing other than the structural 
casing string, drilling shall not be resumed until there has been a time 
lapse of 8 hours under pressure for the conductor casing string and 12 
hours under pressure for all other casing strings. Cement is considered 
under pressure if one or more float valves are shown to be holding the 
cement in place or when other means of holding pressure are used.



Sec. 250.56  Blowout preventer systems and system components.

    (a) General. The BOP systems and system components shall be 
designed, installed, used, maintained, and tested to assure well 
control.
    (b) BOP stacks. The BOP stacks shall consist of an annular preventer 
and the number of ram-type preventers as specified under paragraphs 
(e)(1), (f), and (g) of this section. The pipe rams shall be of a proper 
size(s) to fit the drill pipe in use.
    (c) Working pressure. The working-pressure rating of any BOP 
component shall exceed the anticipated surface pressure to which it may 
be subjected. The District Supervisor may approve a lower working 
pressure rating for the annular preventer if the lessee demonstrates 
that the anticipated or actual well conditions will not place demands 
above its rated working pressure. (Refer to related requirements in 
Sec. 250.64(f)(3)(ii) of this part.)
    (d) BOP equipment. All BOP systems shall be equipped and provided 
with the following:
    (1) An accumulator system which shall provide sufficient capacity to 
supply 1.5 times the volume of fluid necessary to close and hold closed 
all BOP equipment units with a minimum pressure of 200 psi above the 
precharge pressure without assistance from a charging system. No later 
than December 1, 1988, accumulator regulators supplied by rig air and 
without a secondary source of pneumatic supply, shall be equipped with 
manual overrides or alternately, other devices provided to ensure 
capability of hydraulic operations if rig air is lost.
    (2) A backup to the primary accumulator-charging system which shall 
be automatic, supplied by a power source independent from the power 
source to the primary accumulator-charging system, and possess 
sufficient capability to close all BOP components and hold them closed.
    (3) At least one operable remote BOP control station in addition to 
the one on the drilling floor. This control station shall be in a 
readily accessible location away from the drilling floor.
    (4) A drilling spool with side outlets if side outlets are not 
provided in the

[[Page 262]]

body of the BOP stack to provide for separate kill and choke lines.
    (5) For surface BOP systems, a choke and a kill line each equipped 
with two full-opening valves. At least one of the valves on the choke 
line shall be remotely controlled. At least one of the valves on the 
kill line shall be remotely controlled except that a check valve may be 
installed on the kill line in lieu of the remotely controlled valve 
provided two readily accessible manual valves are in place and the check 
valve is placed between the manual valves and the pump. For subsea BOP 
systems, a choke and a kill line each equipped with two full-opening 
valves. At least one of the valves on the choke line and at least one of 
the valves on the kill line shall be remotely controlled.
    (6) A fill-up line above the uppermost preventer.
    (7) A choke manifold suitable for the anticipated pressures to which 
it may be subjected, method of well control to be employed, surrounding 
environment, and corrosiveness, volume, and abrasiveness of fluids. The 
choke manifold shall also meet the following requirements:
    (i) Manifold and choke equipment subject to well and/or pump 
pressure shall have a rated working pressure at least as great as the 
rated working pressure of the ram-type BOP's or as otherwise approved by 
the District Supervisor;
    (ii) All components of the choke manifold system shall be protected 
from the danger, if any, of freezing by heating, draining, or filling 
with proper fluids; and
    (iii) When buffer tanks are installed downstream of the choke 
assemblies for the purpose of manifolding the bleed lines together, 
isolation valves shall be installed on each line.
    (8) Valves, pipes, flexible steel hoses, and other fittings upstream 
of, and including, the choke manifold with pressure ratings at least as 
great as the rated working pressure of the ram-type BOP's or as 
otherwise approved by the District Supervisor.
    (9) A wellhead assembly with a rated working pressure that exceeds 
the anticipated surface pressure to which it may be subjected.
    (10) The following system components:
    (i) On a conventional drilling rig, a kelly cock installed below the 
swivel (upper kelly cock), essentially full-opening, and a similar valve 
of such design that it can be run through the BOP stack (strippable) 
installed at the bottom of the kelly (lower kelly cock). With a mud 
motor in service and while using drill pipe in lieu of a kelly, one 
kelly cock located above and one strippable kelly cock located below the 
joint of drill pipe employed in lieu of a kelly. On a top-drive system 
equipped with a remote controlled valve, a second and lower strippable 
valve of a conventional kelly cock or comparable type either manually or 
remotely controlled. All required manual and remotely controlled valves 
of a kelly cock or comparable type in a top-drive system shall be 
essentially full-opening and tested according to the test pressure and 
test frequency as stated in Sec. 250.57(d) of this part. A wrench to fit 
each manually operable valve in a conventional drilling rig, mud motor, 
and top-drive system shall be stored in a location readily accessible to 
the drilling crew.
    (ii) An inside BOP and an essentially full-opening drill-string 
safety valve in the open position on the rig floor at all times while 
drilling operations are being conducted. These valves shall be 
maintained on the rig floor to fit all connections that are in the drill 
string. A wrench to fit the drill-string safety valve shall be stored in 
a location readily accessible to the drilling crew.
    (iii) A safety valve available on the rig floor assembled with the 
proper connection to fit the casing string being run in the hole.
    (11) Locking devices installed on the ram-type preventers.
    (e) Subsea BOP requirements. (1) Prior to drilling below surface and 
intermediate casing, a BOP system shall be installed consisting of at 
least four remote controlled, hydraulically operated BOP's including at 
least two equipped with pipe rams, one with blind-shear rams, and one 
annular type. A subsea accumulator closing unit or a suitable alternate 
approved by the District Supervisor is required

[[Page 263]]

to provide fast closure of the BOP components and to operate all 
critical functions in case of a loss of the power fluid connection to 
the surface. When proposed casing setting depths or local geology 
indicate the need for a BOP to provide safety during the drilling of the 
surface hole, the District Supervisor may require that a subsea BOP 
system be installed prior to drilling below the conductor casing.
    (2) The BOP system shall include operable dual-pod control systems 
necessary to ensure proper and independent operation of the BOP system 
functions when drilling below the surface casing.
    (3) Prior to the removal of the marine riser, the riser shall be 
displaced with seawater. Sufficient hydrostatic pressure or other 
suitable precautions, such as mechanical or cement plugs or closing the 
BOP, shall be maintained within the wellbore to compensate for the 
reduction in pressure and to maintain a safe controlled well condition.
    (4) Any necessary repair or replacement of the BOP system or a 
system component after installation shall be accomplished under safe 
controlled conditions, (e.g., after casing has been cemented but prior 
to drilling out the casing shoe or by setting a cement plug, bridge 
plug, or a packer).
    (5) When a subsea BOP system is to be used in an area which is 
subject to ice scour, the BOP stack shall be placed in an excavation 
(glory hole) of sufficient depth to assure that the top of the stack is 
below the deepest probable ice-scour depth.
    (f) Surface BOP requirements. Prior to drilling below surface or 
intermediate casing, a BOP system shall be installed consisting of at 
least four remote controlled, hydraulically operated BOP's including at 
least two equipped with pipe rams, one with blind rams, and one annular 
type.
    (g) Tapered drill-string operations. (1) Prior to commencing tapered 
drill-pipe operations, the BOP stack shall be equipped with conventional 
and/or variable-bore pipe rams installed in two or more ram cavities to 
provide the following:
    (i) Two sets of pipe rams capable of sealing around the larger size 
drill string, and
    (ii) One set of pipe rams capable of sealing around the smaller size 
drill string.
    (2) Subsea BOP systems shall have blind-shear ram capability. 
Surface BOP systems shall have blind ram capability.



Sec. 250.57  Blowout preventer systems tests, actuations, inspections, and maintenance.

    (a) Prior to conducting high-pressure tests, all BOP systems shall 
be tested to a low pressure of 200 to 300 psi.
    (b) Surface ram-type BOP's and the choke manifold shall be pressure 
tested with water to rated working pressure or as otherwise approved by 
the District Supervisor. The annular-type BOP shall be pressure tested 
with water to 70 percent of its rated working pressure or as otherwise 
approved by the District Supervisor.
    (c) Subsea BOP system components shall be stump pressure tested at 
the surface with water to their rated working pressure, except that the 
annular-type BOP shall not be pressure tested above 70 percent of its 
rated working pressure. After the installation of the BOP stack on the 
seafloor, the ram-type BOP's and choke manifold shall be pressure tested 
to rated working pressure or as otherwise approved by the District 
Supervisor. The annular preventer shall be pressure tested to 70 percent 
of its rated working pressure or as otherwise approved by the District 
Supervisor.
    (d) In conjunction with the weekly pressure test of surface and 
subsea BOP systems required in paragraph (e) of this section, the choke 
manifold valves; upper and lower kelly cocks; top-drive, inside-BOP, and 
the drill-string safety valves shall be pressure tested to pipe-ram test 
pressures or otherwise approved by the District Supervisor. Safety 
valves assembled with proper casing connections shall be actuated prior 
to running casing.
    (e) Surface and subsea BOP systems shall be pressure tested as 
follows:
    (1) When installed.
    (2) Before drilling out each string of casing or before continuing 
operations in cases where the cement is not drilled out.

[[Page 264]]

    (3) At least once each week, but not exceeding 7 days between 
pressure tests, alternating between control stations and pods. If either 
control station or pod is not functional, further drilling operations 
shall be suspended until that system becomes operable. A period of more 
than 7 days between BOP tests is allowed when there is stuck drill pipe 
or pressure-control operations and remedial efforts are being performed, 
provided that the pressure tests are conducted as soon as possible and 
before normal operations resume. The reason for postponing pressure 
testing shall be entered into the driller's report. Pressure testing 
shall be performed at intervals to allow each drilling crew to operate 
the equipment. The weekly pressure test is not required for blind and 
blind-shear rams.
    (4) Blind and blind-shear rams shall be actuated at least once every 
7 days. Closing pressure on the blind and blind-shear rams greater than 
that necessary to indicate proper operation of the rams is not required.
    (5) Variable bore-pipe rams shall be pressure-tested against all 
sizes of pipe in use, excluding drill collars and bottom-hole tools.
    (6) Following the disconnection or repair of any well-pressure 
containment seal in the wellhead/BOP stack assembly but limited to the 
affected component.
    (f) All BOP systems and marine risers shall be inspected and 
maintained to assure that the equipment will function properly. The BOP 
systems and marine risers shall be visually inspected at least once each 
day if the weather and sea conditions permit the inspection. Inspection 
of BOP systems and marine risers may be accomplished by the use of 
television equipment. The District Supervisor may approve alternate 
methods of inspection of marine risers on dynamic-positioned rigs. 
Casing risers on fixed structures and jackup rigs are not subject to the 
daily underwater inspection requirement.
    (g) The lessee shall record pressure conditions during BOP tests on 
pressure charts, unless otherwise approved by the District Supervisor. 
The test interval for each BOP component tested shall be sufficient to 
demonstrate that the component is effectively holding pressure. The 
charts shall be certified as correct by the operator's representative at 
the facility.
    (h) The time, date, and results of all pressure tests, actuations, 
and inspections of the BOP system, system components, and marine risers 
shall be recorded in the driller's report. The BOP tests shall be 
documented in accordance with the following:
    (1) The documentation shall indicate the sequential order of BOP and 
auxiliary equipment testing and the pressure and duration of each test. 
As an alternate, the documentation in the driller's report may reference 
a BOP test plan that contains the required information and is retained 
on file at the facility.
    (2) The control station used during the test shall be identified in 
the driller's report. For a subsea system, the pod used during the test 
shall be identified in the driller's report.
    (3) Any problems or irregularities observed during BOP and auxiliary 
equipment testing and any actions taken to remedy such problems or 
irregularities shall be noted in the driller's report.
    (4) Documentation required to be entered in the driller's report may 
instead be referenced in the driller's report. All records including 
pressure charts, driller's report, and referenced documents pertaining 
to BOP tests, actuations, and inspections, shall be available for MMS 
review at the facility for the duration of the drilling activity. 
Following completion of the drilling activity, all such records shall be 
retained for a period of 2 years at the facility, at the lessee's field 
office nearest the OCS facility, or at another location conveniently 
available to the District Supervisor.

[53 FR 10690, Apr. 1, 1988, as amended at 56 FR 1914, Jan. 18, 1991]



Sec. 250.58  Well-control drills.

    (a) Well-control drills shall be conducted for each drilling crew in 
accordance with the following requirements:
    (1) Drills shall be designed to acquaint each crew member with each 
member's function at the particular test station so each member can 
perform their functions promptly and efficiently.

[[Page 265]]

    (2) A well-control drill plan, applicable to the particular site, 
shall be prepared for each crew member outlining the assignments each 
member is to fulfill during the drill and establishing a prescribed time 
for the completion of each portion of the drill. A copy of the complete 
well-control drill plan shall be posted on the rig floor and/or bulletin 
board.
    (3) The drill shall be carried out during periods of activity 
selected to minimize the risk of sticking the drill pipe or otherwise 
endangering the operation. In each of these drills, the reaction time of 
participants shall be measured up to the point when the designated 
person is prepared to activate the closing sequence of the BOP system. 
The total time for the crew to complete its entire drill assignment 
shall also be measured. This operation shall be recorded on the 
driller's report as ``Well-Control Drill.'' All drills shall be 
initiated by the toolpusher through the raising of the float on the pit-
level device, activating the mud-return indicator, or its equivalent. 
This operation shall be performed at least once each week (well 
conditions permitting) with each crew. The drills shall be timed so they 
will cover a range of different operations which include on-bottom 
drilling and tripping. A diverter drill shall be developed and conducted 
in a similar manner for shallow operations.
    (4) On-bottom drilling. A drill conducted while on bottom shall 
include the following as practicable:
    (i) Detect kick and sound alarm;
    (ii) Position kelly and tool joints so connections are accessible 
from floor, but tool joints are clear of sealing elements in BOP 
systems, stop pumps, check for flow, close in the well;
    (iii) Record time;
    (iv) Record drill-pipe pressure and casing pressure;
    (v) Measure pit gain and mark new level;
    (vi) Estimate volume of additional mud in pits;
    (vii) Weight sample of mud from suction pit;
    (viii) Check all valves on choke manifold and BOP system for correct 
position (open or closed);
    (ix) Check BOP system components and choke manifold for leaks;
    (x) Check flow line and choke exhaust lines for flow;
    (xi) Check accumulator pressure;
    (xii) Prepare to extinguish sources of ignition;
    (xiii) Alert standby boat or prepare safety capsule for launching;
    (xiv) Place crane operator on duty for possible personnel 
evacuation;
    (xv) Prepare to lower escape ladders and prepare other abandonment 
devices for possible use;
    (xvi) Determine materials needed to circulate out kick; and
    (xvii) Time drill and enter drill report on driller's report.
    (5) Tripping pipe. A drill conducted during a trip shall include the 
following as practicable:
    (i) Detect kick and sound alarm;
    (ii) Install safety valve, close safety valve;
    (iii) Position pipe, prepare to close annular preventer;
    (iv) Install inside preventer, open safety valve;
    (v) Record time;
    (vi) Record casing pressure;
    (vii) Check all valves on choke manifold and BOP system for correct 
position (open or closed);
    (viii) Check for leaks on BOP system component and choke manifold;
    (ix) Check flow line and choke exhaust lines for flow;
    (x) Check accumulator pressure;
    (xi) Prepare to extinguish sources of ignition;
    (xii) Alert standby boat or prepare safety capsule for launching;
    (xiii) Place crane operator on duty for possible personnel 
evacuation;
    (xiv) Prepare to lower escape ladders and prepare other abandonment 
devices for possible use;
    (xv) Prepare to strip back to bottom; and
    (xvi) Time drill and enter drill report on driller's report.
    (b) A well-control drill may be required by a Minerals Management 
Service (MMS) authorized representative after consulting with the 
lessee's senior representative present.



Sec. 250.59  Diverter systems.

    (a) When drilling a conductor or surface hole, all drilling units 
shall be

[[Page 266]]

equipped with a diverter system consisting of a diverter sealing 
element, diverter lines, and control systems unless otherwise approved 
by the District Supervisor for floating drilling operations. The 
diverter system shall be designed, installed, and maintained so as to 
divert gases, water, mud, and other materials away from the facilities 
and personnel.
    (b) No later than May 31, 1990, diverter systems shall be in 
compliance with the requirements of this section. The requirements 
applicable to diverters which were in effect April 1, 1988 shall remain 
in effect until May 31, 1990.
    (c) The diverter system shall be equipped with remote-controlled 
valves in the flow and vent lines that can be operated from at least one 
remote-control station in addition to the one on the drilling floor. Any 
valve used in a diverter system shall be full-opening. No manual or 
butterfly valve shall be installed in any part of the diverter system. 
There shall be a minimum number of turns in the vent line(s) downstream 
of the spool outlet flange and the radius of curvature of turns shall be 
as large as practicable. All right-angle and sharp turns shall be 
targeted. Flexible hose may be used for diverter lines instead of rigid 
pipe if the flexible hose has integral end couplings. The entire 
diverter system shall be firmly anchored and supported to prevent 
whipping and vibration. All diverter control instruments and lines shall 
be protected from physical damage from thrown and falling objects.
    (d) For drilling operations conducted with a surface wellhead 
configuration, the following shall apply:
    (1) If the diverter system utilizes only one spool outlet, branch 
lines shall be installed to provide downwind diversion capability; and
    (2) No spool outlet or diverter line internal diameter shall be less 
than 10 inches, except that dual spool outlets are acceptable provided 
that each outlet has a minimum internal diameter of 8 inches and that 
both outlets are piped to overboard lines and that each line downstream 
of the changeover nipple at the spool has a minimum internal diameter of 
10 inches.
    (e) For drilling operations conducted where a floating or 
semisubmersible type of drilling vessel is used and drilling fluids are 
circulated to the drilling vessel, the following shall apply:
    (1) If the diverter system utilizes only one spool outlet, branch 
lines shall be installed to provide downwind diversion capability;
    (2) No spool outlet or diverter line internal diameter shall be less 
than 12 inches; and
    (3) Dynamically positioned drill ships may be equipped with a single 
vent line provided appropriate vessel heading is maintained to allow for 
downwind diversion.
    (f) The diverter sealing element and diverter valves shall be 
pressure tested to a minimum of 200 psi when nippled up on conductor 
casing with a surface wellhead configuration. No more than 7 days shall 
elapse between subsequent similar pressure tests. For surface and subsea 
wellhead configurations, the diverter sealing element, diverter valves, 
and diverter-control systems, including the remote control system, shall 
be actuation-tested and the vent lines flow tested when first installed. 
Subsequent actuation tests shall be conducted not less than once every 
24-hour period thereafter alternating between control stations. All 
pressure test, flow test, and actuation results shall be recorded in the 
driller's report.
    (g) Diverter systems and components for use in subfreezing 
conditions shall be suitable for use under these conditions.



Sec. 250.60  Mud program.

    (a) General requirements. The quantities, characteristics, use, and 
testing of drilling mud and the related drilling procedures shall be 
designed and implemented to prevent the loss of well control.
    (b) Mud control. (1) Before starting out of the hole with drill 
pipe, the mud shall be properly conditioned by circulation with the 
drill pipe just off bottom to the extent that a volume of drilling mud 
equal to the annular volume is displaced. This procedure may be omitted 
if proper documentation in the driller's report shows the following:

[[Page 267]]

    (i) There is no indication of influx of formation fluids prior to 
starting to pull the drill pipe from the hole.
    (ii) The weight of the returning mud is essentially the same as the 
weight of the mud entering the hole. In the event that the returning mud 
is lighter than the entering mud by a weight differential equal to or 
greater than 0.2 pounds per gallon (1.5 pounds per cubic foot), the mud 
shall be circulated until a volume of drilling mud equal to the annular 
volume is displaced, and the mud properties measured to assure that 
there has been no influx of gas or liquid.
    (iii) Other mud properties recorded on the daily drilling log are 
within the limits established by the approved mud program.
    (2) When mud in the hole is circulated, the driller's report shall 
be so noted.
    (3) When coming out of the hole with drill pipe, the annulus shall 
be filled with mud before the change in mud level decreases the 
hydrostatic pressure by 75 psi, or every five stands of drill pipe, 
whichever gives a lower decrease in hydrostatic pressure. The number of 
stands of drill pipe and drill collars that may be pulled prior to 
filling the hole and the equivalent mud volume shall be calculated and 
posted near the driller's station. A mechanical, volumetric, or 
electronic device for measuring the amount of mud required to fill the 
hole shall be utilized.
    (4) Drill pipe and downhole tool running and pulling speeds shall be 
at controlled rates so as not to induce an influx of formation fluids 
from the effects of swabbing nor cause a loss of drilling fluid and 
corresponding hydrostatic pressure decrease from the effects of surging.
    (5) When there is an indication of swabbing or influx of formation 
fluids, the safety devices and measures necessary to control the well 
shall be employed. The mud shall be circulated and conditioned, on or 
near bottom, unless well or mud conditions prevent running the drill 
pipe back to the bottom.
    (6) For each casing string, the maximum pressure to be contained 
under the BOP shall be posted near the driller's station.
    (7) In areas where permafrost and/or hydrate zones may be present or 
are known to be present, drilling fluid temperatures shall be controlled 
or other measures taken to drill safely through those zones.
    (8) An operable mud-gas separator and operable degasser shall be 
installed in the mud system prior to commencement of drilling operations 
and shall be maintained for use throughout the drilling of the well.
    (9) The mud in the hole shall be circulated or reverse-circulated 
prior to pulling the drill-stem test tools from the hole. If circulating 
out test fluid is not feasible, test fluids may be bullheaded out of the 
drill-stem test string and tools with an appropriate kill fluid prior to 
pulling the test tools.
    (c) Mud-testing and monitoring equipment. (1) Mud-testing equipment 
shall be maintained on the drilling rig at all times, and mud tests 
shall be performed once each tour, or more frequently, as conditions 
warrant. Such tests shall be conducted in accordance with industry-
accepted practices and shall include mud density, viscosity, and gel 
strength, hydrogen-ion concentration (pH), filtration, and other tests 
as may be deemed necessary by the District Supervisor in the interests 
of monitoring and maintaining mud quality for safe operations, 
prevention of downhole equipment problems, and for kick detection. The 
results of these tests shall be recorded in the driller's report.
    (2) The following mud-system monitoring equipment shall be installed 
with derrick floor indicators and used when mud returns are established 
and throughout subsequent drilling operations:
    (i) Recording mud-pit level indicator to determine mud-pit volume 
gains and losses. This indicator shall include both a visual and an 
audible warning device.
    (ii) Mud-volume measuring device to accurately determine mud volumes 
required to fill the hole on trips.
    (iii) Mud-return indicator devices which indicate the relationship 
between mud-return flow rate and pump discharge rate. This indicator 
shall include both a visual and an audible warning device.

[[Page 268]]

    (iv) Gas-detecting equipment to monitor the drilling mud returns 
with indicators located in the mud-logging compartment or on the rig 
floor. If the indicators are only in the mud-logging compartment, there 
shall be a means of immediate communication with the rig floor, and the 
gas-detecting equipment shall be continually manned. If the indicators 
are on the rig floor only, an audible alarm shall be installed.
    (d) Mud quantities. (1) Quantities of mud and mud materials at the 
drill site shall be utilized, maintained, and replenished as necessary 
to ensure well control. Those quantities shall be based on known or 
anticipated drilling conditions to be encountered, rig storage capacity, 
weather conditions, and estimated time for delivery.
    (2) Daily inventories of mud and mud materials including weight 
materials and additives at the drill site shall be recorded and those 
records maintained at the well site.
    (3) Drilling operations shall be suspended in the absence of 
sufficient quantities of mud and mud materials to maintain well control.
    (e) Safety precautions in mud-handling areas. Mud-handling areas 
which are classified as per API RP 500B where dangerous concentrations 
of combustible gas may accumulate shall be equipped with ventilation 
systems and gas monitors as described below no later than May 31, 1989. 
Regulatory requirements in effect on April 1, 1988 are applicable until 
May 31, 1989.
    (1) Be ventilated with high-capacity mechanical ventilation systems 
capable of replacing the air once every 5 minutes or 1.0 cubic feet of 
air-volume flow per minute per square foot of area, whichever is 
greater, unless such ventilation is provided by natural means. If not 
continuously activated, mechanical ventilation systems shall be 
activated on signal from gas detectors that are operational at all times 
indicating the presence of 1 percent or more of gas by volume.
    (2) Be maintained at a negative pressure relative to an adjacent 
area if mechanical ventilation is installed to meet the requirements in 
paragraph (e)(1) of this section and discharges may be hazardous. The 
negative pressure areas shall be protected with at least one of the 
following: (i) A pressure-sensitive alarm, (ii) open-door alarms on each 
access to the area, (iii) automatic door-closing devices, (iv) air 
locks, or (v) other devices as approved by the District Supervisor.
    (3) Be fitted with gas detectors and alarms except in open areas 
where adequate ventilation is provided by natural means.
    (4) Be equipped with either explosion-proof or pressurized 
electrical equipment to prevent the ignition of explosive gases. Where 
air is used for pressuring, the air intake shall be located outside of, 
and as far as practicable from, hazardous areas.
    (5) Mechanical ventilation systems shall be fitted with alarms which 
are activated upon a failure of the system.
    (6) Gas detection systems shall be tested for operation and 
recalibrated at a frequency such that no more than 90 days shall elapse 
between tests.

[53 FR 10690, Apr. 1, 1988, as amended at 55 FR 47752, Nov. 15, 1990]



Sec. 250.61  Securing of wells.

    A downhole safety device such as a cement plug, bridge plug, or 
packer shall be timely installed when drilling operations are 
interrupted by events such as those which force evacuation of the 
drilling crew, prevent station keeping, or require repairs to major 
drilling or well-control equipment. In floating drilling operations, the 
use of blind-shear rams or pipe rams and an inside BOP may be approved 
by the District Supervisor in lieu of the above requirements if 
supported by evidence of special circumstances and/or the lack of 
sufficient time.



Sec. 250.62  Field drilling rules.

    When geological and engineering information available in a field 
enables a District Supervisor to determine specific operating 
requirements appropriate to wells to be drilled in the field, field 
drilling rules may be established on the initiative of the District 
Supervisor, or in response to a request from a lessee. Such rules may 
modify the requirements of this subpart. After field drilling rules have 
been established, development wells to which such rules apply shall be 
drilled in accordance with such rules and other requirements

[[Page 269]]

of this subpart. Field drilling rules may be amended or cancelled for 
cause at any time upon the initiative of the District Supervisor or upon 
the approval of a request by a lessee.



Sec. 250.63  Supervision, surveillance, and training.

    (a) The lessee shall provide onsite supervision of drilling 
operations on a 24-hour per day basis.
    (b) From the time drilling operations are initiated and until the 
well is completed or abandoned, a member of the drilling crew or the 
toolpusher shall maintain rig-floor surveillance continuously, unless 
the well is secured with BOP's, bridge plugs, packers, or cement plugs.
    (c) Lessee and drilling contractor personnel shall be trained and 
qualified in accordance with the provisions of Subpart O of this part 
and MMS Training Standard MMS-OCS-T 1, Training and Qualifications of 
Personnel in Well-Control Equipment and Techniques for Drilling Offshore 
Locations (Second Edition). Records of specific training which lessee 
and drilling contractor personnel have successfully completed, the dates 
of completion, and the names and dates of the courses shall be 
maintained at the drill site.



Sec. 250.64  Applications for permit to drill.

    (a) Prior to commencing the drilling of a well under an approved 
Exploration Plan, Development and Production Plan, or Development 
Operations Coordination Document, the lessee shall file a Form MMS-123, 
APD, with the District Supervisor for approval. Prior to commencing 
operations, written approval from the District Supervisor must be 
received by the lessee unless oral approval has been given pursuant to 
Sec. 250.6(a).
    (b) The APD's for wells to be drilled from mobile drilling units 
shall include the following:
    (1) An identification of the maximum environmental and operational 
conditions the rig is designed to withstand.
    (2) Applicable current documentation of operational limitations 
imposed by the American Bureau of Shipping classification or other 
appropriate classification society and either a U.S. Coast Guard 
Certificate of Inspection or a U.S. Coast Guard Letter of Compliance.
    (3) For frontier areas, the design and operating limitations beyond 
which suspension, curtailment, or modification of drilling or rig 
operations are required (e.g., vessel motion, offset, riser angle, 
anchor tensions, wind speed, wave height, currents, icing or ice-
loading, settling, tilt or lateral movement, resupply capability) and 
the contingency plans which identify actions to be taken prior to 
exceeding the design or operating limitations of the rig.
    (4) A program which provides for safety in drilling operations where 
a floating or semisubmersible type of drilling vessel is used and 
formation competency at the structural and/or conductor casing setting 
depth(s) is (are) not adequate to permit circulation of drilling fluids 
to the vessel while drilling the conductor and/or surface hole. This 
program shall include all known pertinent information including seismic 
and geologic data, water depth, drilling-fluid hydrostatic pressure, a 
schematic diagram indicating the equipment to be installed from the 
rotary table to the proposed conductor and/or surface casing seat(s), 
and the contingency plan for moving off location.
    (c) The APD's shall include rated capacities of the proposed 
drilling unit and of major drilling equipment.
    (d) In those areas which are subject to subfreezing conditions, the 
lessee shall furnish evidence that the drilling equipment, BOP system 
and components, drilling safety systems, diverter systems, and other 
associated equipment and materials are suitable for drilling operations 
under subfreezing conditions.
    (e) After a drilling unit has been approved for use in an MMS 
District, the information listed in paragraphs (b) (1), (2), and (3), 
(c), and (d) of this section need not be resubmitted unless required by 
the District Supervisor or there are changes in equipment that affect 
the rated capacity of the unit.
    (f) An APD shall include the following in addition to a fully 
completed Form MMS-123:
    (1) A plat, drawn to a scale of 2,000 feet to the inch, showing the 
surface and subsurface location of the well to

[[Page 270]]

be drilled and of all the wells previously drilled in the vicinity from 
which information is available. Locations shall be indicated in feet 
from the block line.
    (2) The design criteria considered for the well and for well 
control, including the following:
    (i) Pore pressures.
    (ii) Formation fracture gradients.
    (iii) Potential lost circulation zones.
    (iv) Mud weights.
    (v) Casing setting depths.
    (vi) Anticipated surface pressures (which for purposes of this 
section are defined as the pressure which can reasonably be expected to 
be exerted upon a casing string and its related wellhead equipment). In 
the calculation of an anticipated surface pressure, the lessee shall 
take into account the drilling, completion, and producing conditions. 
The lessee shall consider mud densities to be used below various casing 
strings, fracture gradients of the exposed formations, casing setting 
depths, total well depth, formation fluid type, and other pertinent 
conditions. Considerations for calculating anticipated surface pressure 
may vary for each segment of the well. The lessee shall include as a 
part of the statement of anticipated surface pressures the calculations 
used to determine these pressures during the drilling phase and the 
completion phase, including the anticipated surface pressure used for 
production string design.
    (vii) If a shallow hazards site survey is conducted, the lessee 
shall submit with or prior to the submittal of the APD, two copies of a 
summary report describing the geological and manmade conditions present. 
The lessee shall also submit two copies of the site maps and data 
records identified in the survey strategy.
    (viii) Permafrost zones, if applicable.
    (3) A BOP equipment program including the following:
    (i) The pressure rating of BOP equipment.
    (ii) A well-control procedure for use of the annular preventer for 
those wells where the anticipated surface pressure exceeds the rated 
working pressure of the annular preventer.
    (iii) A description of subsea BOP accumulator system or other type 
of closing system proposed for use.
    (iv) A schematic drawing of the diverter system to be used (plan and 
elevation views) showing spool outlet internal diameter(s); diverter-
line lengths and diameters, burst strengths, and radius of curvature at 
each turn; valve type, size, working pressure rating, and location; the 
control instrumentation logic; and the operating procedure to be used by 
lessee or contractor personnel.
    (v) A schematic drawing of the BOP stack showing the inside diameter 
of the BOP stack, and the number of annular, pipe ram, variable-bore 
pipe ram, blind ram, and blind-shear ram preventers.
    (4) A casing program including the following:
    (i) Casing size, weight, grade, type of connection, and setting 
depth;
    (ii) Casing design safety factors for tension, collapse, and burst 
with the assumptions made to arrive at these values; and
    (iii) In areas containing permafrost, casing programs that 
incorporate setting depths for conductor and surface casing based on the 
anticipated depth of the permafrost at the proposed well location and 
which utilize the current state-of-the-art methods to safely drill and 
set casing. The casing program shall provide protection from thaw 
subsidence and freezeback effect, proper anchorage, and well control.
    (5) The drilling prognosis including the following:
    (i) Projected plans for coring at specified depths;
    (ii) Projected plans for logging;
    (iii) Estimated depths to the top of significant marker formations; 
and
    (iv) Estimated depths at which encounters with significant porous 
and permeable zones containing fresh water, oil, gas, or abnormally 
pressured water are expected.
    (6) A cementing program including type and amount of cement in cubic 
feet to be used for each casing string.
    (7) A mud program including the minimum quantities of mud and mud 
materials, including weight materials, to be kept at the site.

[[Page 271]]

    (8) A directional survey program for directionally drilled wells.
    (9) A plot of the estimated pore pressures and formation fracture 
gradients and the proposed mud weights and casing setting depths on the 
same sheet.
    (10) A H2S Contingency Plan, if applicable, and not 
submitted previously.
    (11) Such other information as may be required by the District 
Supervisor.
    (g) Public information copies of the APD shall be submitted in 
accordance with Sec. 250.17 of this part.

[53 FR 10690, Apr. 1, 1988, as amended at 58 FR 49928, Sept. 24, 1993]



Sec. 250.65  Sundry notices and reports on wells.

    (a) Notices of the lessee's intention to change plans, make changes 
in major drilling equipment, deepen or plug back a well, or engage in 
similar activities and subsequent reports pertaining to such operations 
shall be submitted to the District Supervisor on Form MMS-124, Sundry 
Notices and Reports on Wells. Prior to commencing operations, written 
approval must be received from the District Supervisor unless oral 
approval is obtained.
    (b) The Form MMS-124 submitted shall contain a detailed statement of 
the proposed work that will materially change from the approved work 
described in the APD. Information submitted shall include the present 
status of the well, including the production string or last string of 
casing, the well depth, the present production zones and productive 
capability, and all other information specified on Form MMS-124. Within 
30 days after completion of the work, a subsequent detailed report of 
all the work done and the results obtained shall be submitted.
    (c) A Form MMS-124 with a plat, certified by a registered land 
surveyor, shall be filed as soon as the well's final surveyed surface 
location, water depth, and the rotary kelly bushing elevation have been 
determined.
    (d) Public information copies of Sundry Notices and Reports on Wells 
shall be submitted in accordance with Sec. 250.17 of this part.

[53 FR 10690, Apr. 1, 1988, as amended at 58 FR 49928, Sept. 24, 1993]



Sec. 250.66  Well records.

    (a) Complete and accurate records for each well and of all well 
operations shall be retained for a period of 2 years at the lessee's 
field office nearest the OCS facility or at another location 
conveniently available to the District Supervisor. The records shall 
contain a description of any significant malfunction or problem; all the 
formations penetrated; the content and character of oil, gas, and other 
mineral deposits and water in each formation; the kind, weight, size, 
grade, and setting depth of casing; all well logs and surveys run in the 
wellbore; and all other information required by the District Supervisor 
in the interests of resource evaluation, waste prevention, conservation 
of natural resources, protection of correlative rights, safety, and 
environment.
    (b) When drilling operations are suspended, or temporarily 
prohibited under the provisions of Sec. 250.10 of this part, the lessee 
shall, within 30 days after termination of the suspension or temporary 
prohibition or within 30 days after the completion of any activities 
related to the suspension or prohibition, transmit to the District 
Supervisor duplicate copies of the records of all activities related to 
and conducted during the suspension or temporary prohibition on, or 
attached to, Form MMS-125, Well Summary Report, or Form MMS-124, as 
appropriate.
    (c) Upon request by the Regional or District Supervisor, the lessee 
shall furnish the following:
    (1) Copies of the records of any of the well operations specified in 
paragraph (a) of this section;
    (2) Paleontological reports identifying microscopic fossils by depth 
and/or washed samples of drill cuttings normally maintained by the 
lessee for paleontological determinations;
    (3) Copies of the daily driller's report at a frequency as 
determined by the District Supervisor. Items to be reported include spud 
dates, casing setting depths, cement quantities, casing characteristics, 
pressure integrity tests, mud weights, kicks, lost returns, and any 
unusual activities; and

[[Page 272]]

    (4) Legible, exact copies of service company reports on cementing, 
perforating, acidizing, analyses of cores, testing, or other similar 
services.
    (d) As soon as available, the lessee shall transmit copies (field or 
final prints of individual runs) of logs or charts of electrical, 
radioactive, sonic, and other well-logging operations, directional-well 
surveys, and analyses of cores. Composite logs of multiple runs and 
directional-well surveys shall be transmitted to the District Supervisor 
in duplicate as soon as available but not later than 30 days after 
completion of each well.
    (e) If the drilling unit moves from the wellbore prior to completing 
the well, the lessee shall submit to the District Supervisor copies of 
the well records with completed Form MMS-124, within 30 days after 
moving from the wellbore.
    (f) If the Regional or District Supervisor determines that 
circumstances warrant, the lessee shall submit any other reports and 
records of operations, including paleontological interpretations based 
upon identification of microscopic fossils, in the manner and form 
prescribed by the Regional or District Supervisor.
    (g) Records relating to the drilling of a well shall be retained for 
a period of 90 days after drilling operations are completed. Records 
relating to the completion of a well or of any workover activity which 
materially alters the completion configuration or materially affects or 
alters a hydrocarbon-bearing zone shall be kept until the well is 
permanently plugged and abandoned.

[53 FR 10690, Apr. 1, 1988, as amended at 58 FR 49928, Sept. 24, 1993]



Sec. 250.67  Hydrogen sulfide.

    (a) What precautions must I take when operating in an H2S 
area? You must:
    (1) Take all necessary and feasible precautions and measures to 
protect personnel from the toxic effects of H2S and to 
mitigate damage to property and the environment caused by 
H2S. You must follow the requirements of this section when 
conducting drilling, well-completion/well-workover, and production 
operations in zones with H2S present and when conducting 
operations in zones where the presence of H2S is unknown. You 
do not need to follow these requirements when operating in zones where 
the absence of H2S has been confirmed; and
    (2) Follow your approved contingency plan.
    (b) Definitions. Terms used in this section have the following 
meanings:
    Facility means a vessel, a structure, or an artificial island used 
for drilling, well-completion, well-workover, and/or production 
operations.
    H2S absent means:
    (1) Drilling, logging, coring, testing, or producing operations have 
confirmed the absence of H2S in concentrations that could 
potentially result in atmospheric concentrations of 20 ppm or more of 
H2S; or
    (2) Drilling in the surrounding areas and correlation of geological 
and seismic data with equivalent stratigraphic units have confirmed an 
absence of H2S throughout the area to be drilled.
    H2S present means that drilling, logging, coring, 
testing, or producing operations have confirmed the presence of 
H2S in concentrations and volumes that could potentially 
result in atmospheric concentrations of 20 ppm or more of 
H2S.
    H2S unknown means the designation of a zone or geologic 
formation where neither the presence nor absence of H2S has 
been confirmed.
    Well-control fluid means drilling mud and completion or workover 
fluid as appropriate to the particular operation being conducted.
    (c) Classifying an area for the presence of H2S. You 
must:
    (1) Request and obtain an approved classification for the area from 
the Regional Supervisor before you begin operations. Classifications are 
``H2S absent,'' H2S present,'' or ``H2S 
unknown'';
    (2) Submit your request with your application for permit to drill;
    (3) Support your request with available information such as geologic 
and geophysical data and correlations, well logs, formation tests, cores 
and analysis of formation fluids; and
    (4) Submit a request for reclassification of a zone when additional 
data indicate a different classification is needed.

[[Page 273]]

    (d) What do I do if conditions change? If you encounter 
H2S that could potentially result in atmospheric 
concentrations of 20 ppm or more in areas not previously classified as 
having H2S present, you must immediately notify MMS and begin 
to follow requirements for areas with H2S present.
    (e) What are the requirements for conducting simultaneous 
operations? When conducting any combination of drilling, well-
completion, well-workover, and production operations simultaneously, you 
must follow the requirements in the section applicable to each 
individual operation.
    (f) Requirements for submitting an H2S Contingency Plan. 
Before you begin operations, you must submit an H2S 
Contingency Plan to the District Supervisor for approval. Do not begin 
operations before the District Supervisor approves your plan. You must 
keep a copy of the approved plan in the field, and you must follow the 
plan at all times. Your plan must include:
    (1) Safety procedures and rules that you will follow concerning 
equipment, drills, and smoking;
    (2) Training you provide for employees, contractors, and visitors;
    (3) Job position and title of the person responsible for the overall 
safety of personnel;
    (4) Other key positions, how these positions fit into your 
organization, and what the functions, duties, and responsibilities of 
those job positions are;
    (5) Actions that you will take when the concentration of 
H2S in the atmosphere reaches 20 ppm, who will be responsible 
for those actions, and a description of the audible and visual alarms to 
be activated;
    (6) Briefing areas where personnel will assemble during an 
H2S alert. You must have at least two briefing areas on each 
facility and use the briefing area that is upwind of the H2S 
source at any given time;
    (7) Criteria you will use to decide when to evacuate the facility 
and procedures you will use to safely evacuate all personnel from the 
facility by vessel, capsule, or lifeboat. If you use helicopters during 
H2S alerts, describe the types of H2S emergencies 
during which you consider the risk of helicopter activity to be 
acceptable and the precautions you will take during the flights;
    (8) Procedures you will use to safely position all vessels attendant 
to the facility. Indicate where you will locate the vessels with respect 
to wind direction. Include the distance from the facility and what 
procedures you will use to safely relocate the vessels in an emergency;
    (9) How you will provide protective-breathing equipment for all 
personnel, including contractors and visitors;
    (10) The agencies and facilities you will notify in case of a 
release of H2S (that constitutes an emergency), how you will 
notify them, and their telephone numbers. Include all facilities that 
might be exposed to atmospheric concentrations of 20 ppm or more of 
H2S;
    (11) The medical personnel and facilities you will use if needed, 
their addresses, and telephone numbers;
    (12) H2S detector locations in production facilities 
producing gas containing 20 ppm or more of H2S. Include an 
``H2S Detector Location Drawing'' showing:
    (i) All vessels, flare outlets, wellheads, and other equipment 
handling production containing H2S;
    (ii) Approximate maximum concentration of H2S in the gas 
stream; and
    (iii) Location of all H2S sensors included in your 
contingency plan;
    (13) Operational conditions when you expect to flare gas containing 
H2S including the estimated maximum gas flow rate, 
H2S concentration, and duration of flaring;
    (14) Your assessment of the risks to personnel during flaring and 
what precautionary measures you will take;
    (15) Primary and alternate methods to ignite the flare and 
procedures for sustaining ignition and monitoring the status of the 
flare (i.e., ignited or extinguished);
    (16) Procedures to shut off the gas to the flare in the event the 
flare is extinguished;
    (17) Portable or fixed sulphur dioxide (SO2)-detection 
system(s) you will use to determine SO2 concentration and 
exposure hazard when H2S is burned;
    (18) Increased monitoring and warning procedures you will take when 
the

[[Page 274]]

SO2 concentration in the atmosphere reaches 2 ppm;
    (19) Personnel protection measures or evacuation procedures you will 
initiate when the SO2 concentration in the atmosphere reaches 
5 ppm;
    (20) Engineering controls to protect personnel from SO2; 
and
    (21) Any special equipment, procedures, or precautions you will use 
if you conduct any combination of drilling, well-completion, well-
workover, and production operations simultaneously.
    (g) Training program.
    (1) When and how often do employees need to be trained? All 
operators and contract personnel must complete an H2S 
training program to meet the requirements of this section:
    (i) Before beginning work at the facility; and
    (ii) Each year, within 1 year after completion of the previous 
class.
    (2) What training documentation do I need? For each individual 
working on the platform, either:
    (i) You must have documentation of this training at the facility 
where the individual is employed; or
    (ii) The employee must carry a training completion card.
    (3) What training do I need to give to visitors and employees 
previously trained on another facility?
    (i) Trained employees or contractors transferred from another 
facility must attend a supplemental briefing on your H2S 
equipment and procedures before beginning duty at your facility;
    (ii) Visitors who will remain on your facility more than 24 hours 
must receive the training required for employees by paragraph (g)(4) of 
this section; and
    (iii) Visitors who will depart before spending 24 hours on the 
facility are exempt from the training required for employees, but they 
must, upon arrival, complete a briefing that includes:
    (A) Information on the location and use of an assigned respirator; 
practice in donning and adjusting the assigned respirator; information 
on the safe briefing areas, alarm system, and hazards of H2S 
and SO2; and
    (B) Instructions on their responsibilities in the event of an 
H2S release.
    (4) What training must I provide to all other employees? You must 
train all individuals on your facility on the:
    (i) Hazards of H2S and of SO2 and the 
provisions for personnel safety contained in the H2S 
Contingency Plan;
    (ii) Proper use of safety equipment which the employee may be 
required to use;
    (iii) Location of protective breathing equipment, H2S 
detectors and alarms, ventilation equipment, briefing areas, warning 
systems, evacuation procedures, and the direction of prevailing winds;
    (iv) Restrictions and corrective measures concerning beards, 
spectacles, and contact lenses in conformance with ANSI Z88.2;
    (v) Basic first-aid procedures applicable to victims of 
H2S exposure. During all drills and training sessions, you 
must address procedures for rescue and first aid for H2S 
victims;
    (vi) Location of:
    (A) The first-aid kit on the facility;
    (B) Resuscitators; and
    (C) Litter or other device on the facility.
    (vii) Meaning of all warning signals.
    (5) Do I need to post safety information? You must prominently post 
safety information on the facility and on vessels serving the facility 
(i.e,, basic first-aid, escape routes, instructions for use of life 
boats, etc.).
    (h) Drills. (1) When and how often do I need to conduct drills on 
H2S safety discussions on the facility? You must:
    (i) Conduct a drill for each person at the facility during normal 
duty hours at least once every 7-day period. The drills must consist of 
a dry-run performance of personnel activities related to assigned jobs.
    (ii) At a safety meeting or other meetings of all personnel, discuss 
drill performance, new H2S considerations at the facility, 
and other updated H2S information at least monthly.
    (2) What documentation do I need? You must keep records of 
attendance for:
    (i) Drilling, well-completion, and well-workover operations at the 
facility until operations are completed; and
    (ii) Production operations at the facility or at the nearest field 
office for 1 year.

[[Page 275]]

    (i) Visual and audible warning systems--(1) How must I install wind 
direction equipment? You must install wind-direction equipment in a 
location visible at all times to individuals on or in the immediate 
vicinity of the facility.
    (2) When do I need to display operational danger signs, display 
flags, or activate visual or audible alarms?
    (i) You must display warning signs at all times on facilities with 
wells capable of producing H2S and on facilities that process 
gas containing H2S in concentrations of 20 ppm or more.
    (ii) In addition to the signs, you must activate audible alarms and 
display flags or activate flashing red lights when atmospheric 
concentration of H2S reaches 20 ppm.
    (3) What are the requirements for signs? Each sign must be a high-
visibility yellow color with black lettering as follows:

------------------------------------------------------------------------
               Letter height                           Wording          
------------------------------------------------------------------------
12 inches.................................  Danger.                     
                                            Poisonous Gas.              
                                            Hydrogen Sulfide.           
7 inches..................................  Do not approach if red flag 
                                             is flying.                 
(Use appropriate wording at right)........  Do not approach if red      
                                             lights are flashing.       
------------------------------------------------------------------------

    (4) May I use existing signs? You may use existing signs containing 
the words ``Danger-Hydrogen Sulfide-H2S,'' provided the words 
``Poisonous Gas. Do Not Approach if Red Flag is Flying'' or ``Red Lights 
are Flashing'' in lettering of a minimum of 7 inches in height are 
displayed on a sign immediately adjacent to the existing sign.
    (5) What are the requirements for flashing lights or flags? You must 
activate a sufficient number of lights or hoist a sufficient number of 
flags to be visible to vessels and aircraft. Each light must be of 
sufficient intensity to be seen by approaching vessels or aircraft any 
time it is activated (day or night). Each flag must be red, rectangular, 
a minimum width of 3 feet, and a minimum height of 2 feet.
    (6) What is an audible warning system? An audible warning system is 
a public address system or siren, horn, or other similar warning device 
with a unique sound used only for H2S.
    (7) Are there any other requirements for visual or audible warning 
devices? Yes, you must:
    (i) Illuminate all signs and flags at night and under conditions of 
poor visibility; and
    (ii) Use warning devices that are suitable for the electrical 
classification of the area.
    (8) What actions must I take when the alarms are activated? When the 
warning devices are activated, the designated responsible persons must 
inform personnel of the level of danger and issue instructions on the 
initiation of appropriate protective measures.
    (j) H2S-detection and H2S monitoring 
equipment.--(1) What are the requirements for an H2S 
detection system? An H2S detection system must:
    (i) Be capable of sensing a minimum of 10 ppm of H2S in 
the atmosphere; and
    (ii) Activate audible and visual alarms when the concentration of 
H2S in the atmosphere reaches 20 ppm.
    (2) Where must I have sensors for drilling, well-completion, and 
well-workover operations? You must locate sensors at the:
    (i) Bell nipple;
    (ii) Mud-return line receiver tank (possum belly);
    (iii) Pipe-trip tank;
    (iv) Shale shaker;
    (v) Well-control fluid pit area;
    (vi) Driller's station;
    (vii) Living quarters; and
    (viii) All other areas where H2S may accumulate.
    (3) Do I need mud sensors? The District Supervisor may require mud 
sensors in the possum belly in cases where the ambient air sensors in 
the mud-return system do not consistently detect the presence of 
H2S.
    (4) How often must I observe the sensors? During drilling, well-
completion and well-workover operations, you must continuously observe 
the H2S levels indicated by the monitors in the work areas 
during the following operations:
    (i) When you pull a wet string of drill pipe or workover string;
    (ii) When circulating bottoms-up after a drilling break;
    (iii) During cementing operations;
    (iv) During logging operations; and
    (v) When circulating to condition mud or other well-control fluid.

[[Page 276]]

    (5) Where must I have sensors for production operations? On a 
platform where gas containing H2S of 20 ppm or greater is 
produced, processed, or otherwise handled:
    (i) You must have a sensor in rooms, buildings, deck areas, or low-
laying deck areas not otherwise covered by paragraph (j)(2) of this 
section, where atmospheric concentrations of H2S could reach 
20 ppm or more. You must have at least one sensor per 400 square feet of 
deck area or fractional part of 400 square feet;
    (ii) You must have a sensor in buildings where personnel have their 
living quarters;
    (iii) You must have a sensor within 10 feet of each vessel, 
compressor, wellhead, manifold, or pump, which could release enough 
H2S to result in atmospheric concentrations of 20 ppm at a 
distance of 10 feet from the component;
    (iv) You may use one sensor to detect H2S around multiple 
pieces of equipment, provided the sensor is located no more than 10 feet 
from each piece, except that you need to use at least two sensors to 
monitor compressors exceeding 50 horsepower;
    (v) You do not need to have sensors near wells that are shut in at 
the master valve and sealed closed;
    (vi) When you determine where to place sensors, you must consider:
    (A) The location of system fittings, flanges, valves, and other 
devices subject to leaks to the atmosphere; and
    (B) Design factors, such as the type of decking and the location of 
fire walls; and
    (vii) The District Supervisor may require additional sensors or 
other monitoring capabilities, if warranted by site specific conditions.
    (6) How must I functionally test the H2S Detectors?
    (i) Personnel trained to calibrate the particular H2S 
detector equipment being used must test detectors by exposing them to a 
known concentration in the range of 10 to 30 ppm of H2S.
    (ii) If the results of any functional test are not within 2 ppm or 
10 percent, whichever is greater, of the applied concentration, 
recalibrate the instrument.
    (7) How often must I test my detectors?
    (i) When conducting drilling, drill stem testing, well-completion, 
or well-workover operations in areas classified as H2S 
present or H2S unknown, test all detectors at least once 
every 24 hours. When drilling, begin functional testing before the bit 
is 1,500 feet (vertically) above the potential H2S zone.
    (ii) When conducting production operations, test all detectors at 
least every 14 days between tests.
    (iii) If equipment requires calibration as a result of two 
consecutive functional tests, the District Supervisor may require that 
H2S-detection and H2S-monitoring equipment be 
functionally tested and calibrated more frequently.
    (8) What documentation must I keep?
    (i) You must maintain records of testing and calibrations (in the 
drilling or production operations report, as applicable) at the facility 
to show the present status and history of each device, including dates 
and details concerning:
    (A) Installation;
    (B) Removal;
    (C) Inspection;
    (D) Repairs;
    (E) Adjustments; and
    (F) Reinstallation.
    (ii) Records must be available for inspection by MMS personnel.
    (9) What are the requirements for nearby vessels? If vessels are 
stationed overnight alongside facilities in areas of H2S 
present or H2S unknown, you must equip vessels with an 
H2S-detection system that activates audible and visual alarms 
when the concentration of H2S in the atmosphere reaches 20 
ppm. This requirement does not apply to vessels positioned upwind and at 
a safe distance from the facility in accordance with the positioning 
procedure described in the approved H2S Contingency Plan.
    (10) What are the requirements for nearby facilities? The District 
Supervisor may require you to equip nearby facilities with portable or 
fixed H2S detector(s) and to test and calibrate those 
detectors. To invoke this requirement, the District Supervisor will 
consider dispersion modeling results from a possible release to 
determine if 20 ppm H2S concentration levels could be 
exceeded at nearby facilities.

[[Page 277]]

    (11) What must I do to protect against SO2 if I burn gas 
containing H2S? You must:
    (i) Monitor the SO2 concentration in the air with 
portable or strategically placed fixed devices capable of detecting a 
minimum of 2 ppm of SO2;
    (ii) Take readings at least hourly and at any time personnel detect 
SO2 odor or nasal irritation;
    (iii) Implement the personnel protective measures specified in the 
H2S Contingency Plan if the SO2 concentration in 
the work area reaches 2 ppm; and
    (iv) Calibrate devices every 3 months if you use fixed or portable 
electronic sensing devices to detect SO2.
    (12) May I use alternative measures? You may follow alternative 
measures instead of those in paragraph (j)(11) of this section if you 
propose and the Regional Supervisor approves the alternative measures.
    (13) What are the requirements for protective-breathing equipment? 
In an area classified as H2S present or H2S 
unknown, you must:
    (i) Provide all personnel, including contractors and visitors on a 
facility, with immediate access to self-contained pressure-demand-type 
respirators with hoseline capability and breathing time of at least 15 
minutes.
    (ii) Design, select, use, and maintain respirators to conform to 
ANSI Z88.2, American National Standard for Respiratory Protection.
    (iii) Make available at least two voice-transmission devices, which 
can be used while wearing a respirator, for use by designated personnel.
    (iv) Make spectacle kits available as needed.
    (v) Store protective-breathing equipment in a location that is 
quickly and easily accessible to all personnel.
    (vi) Label all breathing-air bottles as containing breathing-quality 
air for human use.
    (vii) Ensure that vessels attendant to facilities carry appropriate 
protective-breathing equipment for each crew member. The District 
Supervisor may require additional protective-breathing equipment on 
certain vessels attendant to the facility.
    (viii) During H2S alerts, limit helicopter flights to and 
from facilities to the conditions specified in the H2S 
Contingency Plan. During authorized flights, the flight crew and 
passengers must use pressure-demand-type respirators. You must train all 
members of flight crews in the use of the particular type(s) of 
respirator equipment made available.
    (ix) As appropriate to the particular operation(s), (production, 
drilling, well-completion or well-workover operations, or any 
combination of them), provide a system of breathing-air manifolds, 
hoses, and masks at the facility and the briefing areas. You must 
provide a cascade air-bottle system for the breathing-air manifolds to 
refill individual protective-breathing apparatus bottles. The cascade 
air-bottle system may be recharged by a high-pressure compressor 
suitable for providing breathing-quality air, provided the compressor 
suction is located in an uncontaminated atmosphere.
    (k) Personnel safety equipment.--(1) What additional personnel-
safety equipment do I need? You must ensure that your facility has:
    (i) Portable H2S detectors capable of detecting a 10 ppm 
concentration of H2S in the air available for use by all 
personnel;
    (ii) Retrieval ropes with safety harnesses to retrieve incapacitated 
personnel from contaminated areas;
    (iii) Chalkboards and/or note pads for communication purposes 
located on the rig floor, shale-shaker area, the cement-pump rooms, 
well-bay areas, production processing equipment area, gas compressor 
area, and pipeline-pump area;
    (iv) Bull horns and flashing lights; and
    (v) At least three resuscitators on manned facilities, and a number 
equal to the personnel on board, not to exceed three, on normally 
unmanned facilities, complete with face masks, oxygen bottles, and spare 
oxygen bottles.
    (2) What are the requirements for ventilation equipment? You must:
    (i) Use only explosion-proof ventilation devices;
    (ii) Install ventilation devices in areas where H2S or 
SO2 may accumulate; and

[[Page 278]]

    (iii) Provide movable ventilation devices in work areas. The movable 
ventilation devices must be multidirectional and capable of dispersing 
H2S or SO2 vapors away from working personnel.
    (3) What other personnel safety equipment do I need? You must have 
the following equipment readily available on each facility:
    (i) A first-aid kit of appropriate size and content for the number 
of personnel on the facility; and
    (ii) At least one litter or an equivalent device.
    (l) Do I need to notify MMS in the event of an H2S 
release? You must notify MMS without delay in the event of a gas release 
which results in a 15-minute time weighted average atmospheric 
concentration of H2S of 20 ppm or more anywhere on the 
facility.
    (m) Do I need to use special drilling, completion and workover 
fluids or procedures? When working in an area classified as 
H2S present or H2S unknown:
    (1) You may use either water- or oil-base muds in accordance with 
Sec. 250.40(b)(1).
    (2) If you use water-base well-control fluids, and if ambient air 
sensors detect H2S, you must immediately conduct either the 
Garrett-Gas-Train test or a comparable test for soluble sulfides to 
confirm the presence of H2S.
    (3) If the concentration detected by air sensors in over 20 ppm, 
personnel conducting the tests must don protective-breathing equipment 
conforming to paragraph (j)(13) of this section.
    (4) You must maintain on the facility sufficient quantities of 
additives for the control of H2S, well-control fluid pH, and 
corrosion equipment.
    (i) Scavengers. You must have scavengers for control of 
H2S available on the facility. When H2S is 
detected, you must add scavengers as needed. You must suspend drilling 
until the scavenger is circulated throughout the system.
    (ii) Control pH. You must add additives for the control of pH to 
water-base well-control fluids in sufficient quantities to maintain pH 
of at least 10.0.
    (iii) Corrosion inhibitors. You must add additives to the well-
control fluid system as needed for the control of corrosion.
    (5) You must degas well-control fluids containing H2S at 
the optimum location for the particular facility. You must collect the 
gases removed and burn them in a closed flare system conforming to 
paragraph (q)(6) of this section.
    (n) What must I do in the event of a kick? In the event of a kick, 
you must use one of the following alternatives to dispose of the well-
influx fluids giving consideration to personnel safety, possible 
environmental damage, and possible facility well-equipment damage:
    (1) Contain the well-fluid influx by shutting in the well and 
pumping the fluids back into the formation.
    (2) Control the kick by using appropriate well-control techniques to 
prevent formation fracturing in an open hole within the pressure limits 
of the well equipment (drill pipe, work string, casing, wellhead, BOP 
system, and related equipment). The disposal of H2S and other 
gases must be through pressurized or atmospheric mud-separator equipment 
depending on volume, pressure and concentration of H2S. The 
equipment must be designed to recover well-control fluids and burn the 
gases separated from the well-control fluid. The well-control fluid must 
be treated to neutralize H2S and restore and maintain the 
proper quality.
    (o) Well testing in a zone known to contain H2S. When 
testing a well in a zone with H2S present, you must do all of 
the following:
    (1) Before starting a well test, conduct safety meetings for all 
personnel who will be on the facility during the test. At the meetings, 
emphasize the use of protective-breathing equipment, first-aid 
procedures, and the Contingency Plan. Only competent personnel who are 
trained and are knowledgeable of the hazardous effects of H2S 
must be engaged in these tests.
    (2) Perform well testing with the minimum number of personnel in the 
immediate vicinity of the rig floor and with the appropriate test 
equipment to safely and adequately perform the test. During the test, 
you must continuously monitor H2S levels.

[[Page 279]]

    (3) Not burn produced gases except through a flare which meets the 
requirements of paragraph (q)(6) of this section. Before flaring gas 
containing H2S, you must activate SO2 monitoring 
equipment in accordance with paragraph (j)(11) of this section. If you 
detect SO2 in excess of 2 ppm, you must implement the 
personnel protective measures in your H2S Contingency Plan, 
required by paragraph (f)(13)(iv) of this section. You must also follow 
the requirements of Sec. 250.175. You must pipe gases from stored test 
fluids into the flare outlet and burn them.
    (4) Use downhole test tools and wellhead equipment suitable for 
H2S service.
    (5) Use tubulars suitable for H2S service. You must not 
use drill pipe for well testing without the prior approval of the 
District Supervisor. Water cushions must be thoroughly inhibited in 
order to prevent H2S attack on metals. You must flush the 
test string fluid treated for this purpose after completion of the test.
    (6) Use surface test units and related equipment that is designed 
for H2S service.
    (p) Metallurgical properties of equipment. When operating in a zone 
with H2S present, you must use equipment that is constructed 
of materials with metallurgical properties that resist or prevent 
sulfide stress cracking (also known as hydrogen embrittlement, stress 
corrosion cracking, or H2S embrittlement), chloride-stress 
cracking, hydrogen-induced cracking, and other failure modes. You must 
do all of the following:
    (1) Use tubulars and other equipment, casing, tubing, drill pipe, 
couplings, flanges, and related equipment that is designed for 
H2S service.
    (2) Use BOP system components, wellhead, pressure-control equipment, 
and related equipment exposed to H2S-bearing fluids that 
conform to NACE Standard MR.01-75-96.
    (3) Use temporary downhole well-security devices such as retrievable 
packers and bridge plugs that are designed for H2S service.
    (4) When producing in zones bearing H2S, use equipment 
constructed of materials capable of resisting or preventing sulfide 
stress cracking.
    (5) Keep the use of welding to a minimum during the installation or 
modification of a production facility. Welding must be done in a manner 
that ensures resistance to sulfide stress cracking.
    (q) General requirements when operating in an H2S zone--
(1) Coring operations. When you conduct coring operations in 
H2S-bearing zones, all personnel in the working area must 
wear protective-breathing equipment at least 10 stands in advance of 
retrieving the core barrel. Cores to be transported must be sealed and 
marked for the presence of H2S.
    (2) Logging operations. You must treat and condition well-control 
fluid in use for logging operations to minimize the effects of 
H2S on the logging equipment.
    (3) Stripping operations. Personnel must monitor displaced well-
control fluid returns and wear protective-breathing equipment in the 
working area when the atmospheric concentration of H2S 
reaches 20 ppm or if the well is under pressure.
    (4) Gas-cut well-control fluid or well kick from H2S-
bearing zone. If you decide to circulate out a kick, personnel in the 
working area during bottoms-up and extended-kill operations must wear 
protective-breathing equipment.
    (5) Drill- and workover-string design and precautions. Drill- and 
workover-strings must be designed consistent with the anticipated depth, 
conditions of the hole, and reservoir environment to be encountered. You 
must minimize exposure of the drill- or workover-string to high stresses 
as much as practical and consistent with well conditions. Proper 
handling techniques must be taken to minimize notching and stress 
concentrations. Precautions must be taken to minimize stresses caused by 
doglegs, improper stiffness ratios, improper torque, whip, abrasive wear 
on tool joints, and joint imbalance.
    (6) Flare system. The flare outlet must be of a diameter that allows 
easy nonrestricted flow of gas. You must locate flare line outlets on 
the downside of the facility and as far from the facility as is 
feasible, taking into account the prevailing wind directions, the wake

[[Page 280]]

effects caused by the facility and adjacent structure(s), and the height 
of all such facilities and structures. You must equip the flare outlet 
with an automatic ignition system including a pilot-light gas source or 
an equivalent system. You must have alternate methods for igniting the 
flare. You must pipe to the flare system used for H2S all 
vents from production process equipment, tanks, relief valves, burst 
plates, and similar devices.
    (7) Corrosion mitigation. You must use effective means of monitoring 
and controlling corrosion caused by acid gases (H2S and 
CO2) in both the downhole and surface portions of a 
production system. You must take specific corrosion monitoring and 
mitigating measures in areas of unusually severe corrosion where 
accumulation of water and/or higher concentration of H2S 
exists.
    (8) Wireline lubricators. Lubricators which may be exposed to fluids 
containing H2S must be of H2S-resistant materials.
    (9) Fuel and/or instrument gas. You must not use gas containing 
H2S for instrument gas. You must not use gas containing 
H2S for fuel gas without the prior approval of the District 
Supervisor.
    (10) Sensing lines and devices. Metals used for sensing line and 
safety-control devices which are necessarily exposed to H2S-
bearing fluids must be constructed of H2S-corrosion resistant 
materials or coated so as to resist H2S corrosion.
    (11) Elastomer seals. You must use H2S-resistant 
materials for all seals which may be exposed to fluids containing 
H2S.
    (12) Water disposal. If you dispose of produced water by means other 
than subsurface injection, you must submit to the District Supervisor an 
analysis of the anticipated H2S content of the water at the 
final treatment vessel and at the discharge point. The District 
Supervisor may require that the water be treated for removal of 
H2S. The District Supervisor may require the submittal of an 
updated analysis if the water disposal rate or the potential 
H2S content increases.
    (13) Deck drains. You must equip open deck drains with traps or 
similar devices to prevent the escape of H2S gas into the 
atmosphere.
    (14) Sealed voids. You must take precautions to eliminate sealed 
spaces in piping designs (e.g., slip-on flanges, reinforcing pads) which 
can be invaded by atomic hydrogen when H2S is present.

[62 FR 3795, Jan. 27, 1997]



            Subpart E--Oil and Gas Well-Completion Operations



Sec. 250.70  General requirements.

    Well-completion operations shall be conducted in a manner to protect 
against harm or damage to life (including fish and other aquatic life), 
property, natural resources of the OCS including any mineral deposits 
(in areas leased and not leased), the national security or defense, or 
the marine, coastal, or human environment.



Sec. 250.71  Definition.

    When used in this subpart, the following term shall have the meaning 
given below:
    Well-completion operations means the work conducted to establish the 
production of a well after the production-casing string has been set, 
cemented, and pressure-tested.



Sec. 250.72  Equipment movement.

    The movement of well-completion rigs and related equipment on and 
off a platform or from well to well on the same platform, including 
rigging up and rigging down, shall be conducted in a safe manner. All 
wells in the same well-bay which are capable of producing hydrocarbons 
shall be shut in below the surface with a pump-through-type tubing plug 
and at the surface with a closed master valve prior to moving well-
completion rigs and related equipment, unless otherwise approved by the 
District Supervisor. A closed surface-controlled subsurface safety valve 
of the pump-through type may be used in lieu of the pump-through-type 
tubing plug, provided that the surface control has been locked out of 
operation. The well from which the rig or related equipment is to be 
moved shall also be equipped with a back-pressure valve

[[Page 281]]

prior to removing the blowout preventer (BOP) system and installing the 
tree.

[53 FR 10690, Apr. 1, 1988, as amended at 55 FR 47752, Nov. 15, 1990]



Sec. 250.73  Emergency shutdown system.

    When well-completion operations are conducted on a platform where 
there are other hydrocarbon-producing wells or other hydrocarbon flow, 
an emergency shutdown system (ESD) manually controlled station shall be 
installed near the driller's console or well-servicing unit operator's 
work station.



Sec. 250.74  Hydrogen sulfide.

    When a well-completion operation is conducted in zones known to 
contain hydrogen sulfide (H2S) or in zones where the presence 
of H2S is unknown (as defined in Sec. 250.67 of this part), 
the lessee shall take appropriate precautions to protect life and 
property on the platform or completion unit, including, but not limited 
to operations such as blowing the well down, dismantling wellhead 
equipment and flow lines, circulating the well, swabbing, and pulling 
tubing, pumps, and packers. The lessee shall comply with the 
requirements in Sec. 250.67 of this part as well as the appropriate 
requirements of this subpart.



Sec. 250.75  Subsea completions.

    No subsea well completion shall be commenced until the lessee 
obtains written approval from the District Supervisor in accordance with 
Sec. 250.83 of this part. That approval shall be based upon a case-by-
case determination that the proposed equipment and procedures will 
adequately control the well and permit safe production operations.



Sec. 250.76  Crew instructions.

    Prior to engaging in well-completion operations, crew members shall 
be instructed in the safety requirements of the operations to be 
performed, possible hazards to be encountered, and general safety 
considerations to protect personnel, equipment, and the environment. 
Date and time of safety meetings shall be recorded and available at the 
facility for review by MMS representatives.



Sec. 250.77  Welding and burning practices and procedures.

    All welding, burning, and hot tapping activities involved in well-
completion operations shall be conducted in accordance with the 
requirements in Sec. 250.52 of this part.



Sec. 250.78  Electrical requirements.

    All electrical equipment and systems involved in well-completion 
operations shall be designed, installed, equipped, protected, operated, 
and maintained in accordance with the requirements in Sec. 250.53 of 
this part.



Sec. 250.79  Well-completion structures on fixed platforms.

    Derricks, masts, substructures, and related equipment shall be 
selected, designed, installed, used, and maintained so as to be adequate 
for the potential loads and conditions of loading that may be 
encountered during the proposed operations. Prior to moving a well-
completion rig or equipment onto a platform, the lessee shall determine 
the structural capability of the platform to safely support the 
equipment and proposed operations, taking into consideration the 
corrosion protection, age of platform, and previous stresses to the 
platform.

[53 FR 10690, Apr. 1, 1988, as amended at 54 FR 50616, Dec. 8, 1989]



Sec. 250.80  Diesel engine air intakes.

    No later than May 31, 1989, diesel engine air intakes shall be 
equipped with a device to shut down the diesel engine in the event of 
runaway. Diesel engines which are continuously attended shall be 
equipped with either remote operated manual or automatic-shutdown 
devices. Diesel engines which are not continuously attended shall be 
equipped with automatic-shutdown devices.



Sec. 250.81  Traveling-block safety device.

    After May 31, 1989, all units being used for well-completion 
operations which have both a traveling block and a crown block shall be 
equipped with a safety device which is designed to prevent the traveling 
block from striking

[[Page 282]]

the crown block. The device shall be checked for proper operation weekly 
and after each drill-line slipping operation. The results of the 
operational check shall be entered in the operations log.



Sec. 250.82  Field well-completion rules.

    When geological and engineering information available in a field 
enables the District Supervisor to determine specific operating 
requirements, field well-completion rules may be established on the 
District Supervisor's initiative or in response to a request from a 
lessee. Such rules may modify the specific requirements of this subpart. 
After field well-completion rules have been established, well-completion 
operations in the field shall be conducted in accordance with such rules 
and other requirements of this subpart. Field well-completion rules may 
be amended or canceled for cause at any time upon the initiative of the 
District Supervisor or upon the request of a lessee.



Sec. 250.83  Approval and reporting of well-completion operations.

    (a) No well-completion operation shall begin until the lessee 
receives written approval from the District Supervisor. If completion is 
planned and the data are available at the time the Application for 
Permit to Drill, Form MMS-123 (see Sec. 250.64 of this part), is 
submitted, approval for a well completion may be requested on that form. 
If the completion has not been approved or if the completion objective 
or plans have significantly changed, approval for such operations shall 
be requested on Form MMS-124, Sundry Notices and Reports on Wells.
    (b) The following information shall be submitted with Form MMS-124 
(or with Form MMS-123):
    (1) A brief description of the well-completion procedures to be 
followed, a statement of the expected surface pressure, and type and 
weight of completion fluids;
    (2) A schematic drawing of the well showing the proposed producing 
zone(s) and the subsurface well-completion equipment to be used;
    (3) For multiple completions, a partial electric log showing the 
zones proposed for completion, if logs have not been previously 
submitted; and
    (4) When the well-completion is in a zone known to contain 
H2S or a zone where the presence of H2S is 
unknown, information pursuant to Sec. 250.67 of this part.
    (c) Within 30 days after completion, Form MMS-125, Well Summary 
Report, including a schematic of the tubing and subsurface equipment, 
shall be submitted to the District Supervisor.
    (d) Public information copies of Form MMS-125 shall be submitted in 
accordance with Sec. 250.17.

[53 FR 10690, Apr. 1, 1988, as amended at 58 FR 49928, Sept. 24, 1993]



Sec. 250.84  Well-control fluids, equipment, and operations.

    (a) Well-control fluids, equipment, and operations shall be 
designed, utilized, maintained, and/or tested as necessary to control 
the well in foreseeable conditions and circumstances, including 
subfreezing conditions. The well shall be continuously monitored during 
well-completion operations and shall not be left unattended at any time 
unless the well is shut in and secured.
    (b) The following well-control-fluid equipment shall be installed, 
maintained, and utilized:
    (1) A fill-up line above the uppermost BOP;
    (2) A well-control, fluid-volume measuring device for determining 
fluid volumes when filling the hole on trips; and
    (3) A recording mud-pit-level indicator to determine mud-pit-volume 
gains and losses. This indicator shall include both a visual and an 
audible warning device.
    (c) When coming out of the hole with drill pipe, the annulus shall 
be filled with well-control fluid before the change in such fluid level 
decreases the hydrostatic pressure 75 pounds per square inch (psi) or 
every five stands of drill pipe, whichever gives a lower decrease in 
hydrostatic pressure. The number of stands of drill pipe and drill 
collars that may be pulled prior to filling the hole and the equivalent 
well-control fluid volume shall be calculated and posted near the 
operator's station. A mechanical, volumetric, or

[[Page 283]]

electronic device for measuring the amount of well-control fluid 
required to fill the hole shall be utilized.



Sec. 250.85  Blowout prevention equipment.

    (a) The BOP system and system components and related well-control 
equipment shall be designed, used, maintained, and tested in a manner 
necessary to assure well control in foreseeable conditions and 
circumstances, including subfreezing conditions. The working pressure 
rating of the BOP system and BOP system components shall exceed the 
expected surface pressure to which they may be subjected. If the 
expected surface pressure exceeds the rated working pressure of the 
annular preventer, the lessee shall submit with Form MMS-124 or Form 
MMS-123, as appropriate, a well-control procedure that indicates how the 
annular preventer will be utilized, and the pressure limitations that 
will be applied during each mode of pressure control.
    (b) The minimum BOP system for well-completion operations shall 
include the following:
    (1) Three preventers, when the expected surface pressure is less 
than 5,000 psi, consisting of an annular preventer, one preventer 
equipped with pipe rams, and one preventer equipped with blind or blind-
shear rams.
    (2) Four preventers, when the expected surface pressure is 5,000 psi 
or greater, or for multiple tubing strings consisting of an annular 
preventer, two preventers equipped with pipe rams, and one preventer 
equipped with blind or blind-shear rams. When dual tubing strings are 
being handled simultaneously, dual pipe rams shall be installed on one 
of the pipe-ram preventers.
    (3) When tapered drill string is used, the minimum BOP system shall 
include either of the following:
    (i) Four preventers, when the expected surface pressure is less than 
5,000 psi, consisting of an annular preventer, two sets of pipe rams, 
one capable of sealing around the larger size drill string and one 
capable of sealing around the smaller size drill string (one set of 
variable bore rams may be substituted for the two sets of pipe rams), 
and one preventer equipped with blind or blind shear rams; or
    (ii) Five preventers, when the expected surface pressure is 5,000 
psi or greater, consisting of an annular preventer, two sets of pipe 
rams capable of sealing around the larger size drill string, one set of 
pipe rams capable of sealing around the smaller size drill string (one 
set of variable bore rams may be substituted for one set of pipe rams 
capable of sealing around the larger size drill string and the set of 
pipe rams capable of sealing around the smaller size drill string), and 
a preventer equipped with blind or blind-shears rams.
    (c) The BOP systems for well completions shall be equipped with the 
following:
    (1) A hydraulic-actuating system that provides sufficient 
accumulator capacity to supply 1.5 times the volume necessary to close 
all BOP equipment units with a minimum pressure of 200 psi above the 
precharge pressure without assistance from a charging system. No later 
than December 1, 1988, accumulator regulators supplied by rig air and 
without a secondary source of pneumatic supply, shall be equipped with 
manual overrides, or alternately, other devices provided to ensure 
capability of hydraulic operations if rig air is lost.
    (2) A secondary power source, independent from the primary power 
source, with sufficient capacity to close all BOP system components and 
hold them closed.
    (3) Locking devices for the pipe-ram preventers.
    (4) At least one remote BOP-control station and one BOP-control 
station on the rig floor.
    (5) A choke line and a kill line each equipped with two full opening 
valves and a choke manifold. At least one of the valves on the choke 
line shall be remotely controlled. At least one of the valves on the 
kill line shall be remotely controlled, except that a check valve on the 
kill line in lieu of the remotely controlled valve may be installed 
provided that two readily accessible manual valves are in place and the 
check valve is placed between the manual valves and the pump. This 
equipment shall have a pressure rating

[[Page 284]]

at least equivalent to the ram preventers.
    (d) An inside BOP or a spring-loaded, back-pressure safety valve and 
an essentially full-opening, work-string safety valve in the open 
position shall be maintained on the rig floor at all times during well-
completion operations. A wrench to fit the work-string safety valve 
shall be readily available. Proper connections shall be readily 
available for inserting valves in the work string.

[53 FR 10690, Apr. 1, 1988, as amended at 54 FR 50616, Dec. 8, 1989; 58 
FR 49928, Sept. 24, 1993]



Sec. 250.86  Blowout preventer system testing, records, and drills.

    (a) Prior to conducting high-pressure tests, all BOP system 
components shall be successfully tested to a low pressure of 200 psi to 
300 psi. Ram-type BOP's, related control equipment, including the choke 
and kill manifolds, and safety valves shall be successfully tested to 
the rated working pressure of the BOP equipment or as otherwise approved 
by the District Supervisor. Variable bore rams shall be pressure-tested 
against all sizes of drill pipe in the well excluding drill collars. 
Surface BOP systems shall be pressure-tested with water. The annular BOP 
shall be successfully tested at 70 percent of its rated working pressure 
or as otherwise approved by the District Supervisor. Each valve in the 
choke and kill manifolds shall be successfully, sequentially pressure 
tested to the ram-type BOP test pressure.
    (b) The BOP systems shall be tested at the following times:
    (1) When installed.
    (2) At least every 7 days, alternating between control stations and 
at staggered intervals to allow each crew to operate the equipment. If 
either control system is not functional, further operations shall be 
suspended until the nonfunctional system is operable. To test every 7 
days is not required for blind or blind-shear rams. The blind or blind-
shear rams shall be tested at least once every 30 days during 
operations. A longer period between blowout preventer tests is allowed 
when there is a stuck pipe or pressure-control operation and remedial 
efforts are being performed. The tests shall be conducted as soon as 
possible and before normal operations resume. The reason for postponing 
testing shall be entered into the operations log.
    (3) Following repairs that require disconnecting a pressure seal in 
the assembly, the affected seal will be pressure tested.
    (c) All personnel engaged in well-completion operations shall 
participate in a weekly BOP drill to familiarize crew members with 
appropriate safety measures.
    (d) The lessee shall record pressure conditions during BOP tests on 
pressure charts, unless otherwise approved by the District Supervisor. 
The test interval for each BOP component tested shall be sufficient to 
demonstrate that the component is effectively holding pressure. The 
charts shall be certified as correct by the operator's representative at 
the facility.
    (e) The time, date, and results of all pressure tests, actuations, 
inspections, and crew drills of the BOP system, system components, and 
marine risers shall be recorded in the operations log. The BOP tests 
shall be documented in accordance with the following:
    (1) The documentation shall indicate the sequential order of BOP and 
auxiliary equipment testing and the pressure and duration of each test. 
As an alternate, the documentation in the operations log may reference a 
BOP test plan that contains the required information and is retained on 
file at the facility.
    (2) The control station used during the test shall be identified in 
the operations log. For a subsea system, the pod used during the test 
shall be identified in the operations log.
    (3) Any problems or irregularities observed during BOP and auxiliary 
equipment testing and any actions taken to remedy such problems or 
irregularities shall be noted in the operations log.
    (4) Documentation required to be entered in the operations log may 
instead be referenced in the operations log. All records including 
pressure charts, operations log, and referenced documents pertaining to 
BOP tests, actuations, and inspections shall be available for MMS review 
at the facility for the duration of the well-completion activity.

[[Page 285]]

Following completion of the well-completion activity, all such records 
shall be retained for a period of 2 years at the facility, at the 
lessee's field office nearest the OCS facility, or at another location 
conveniently available to the District Supervisor.

[53 FR 10690, Apr. 1, 1988, as amended at 54 FR 50616, Dec. 8, 1989; 55 
FR 47752, Nov. 15, 1990; 56 FR 1915, Jan. 18, 1991]



Sec. 250.87  Tubing and wellhead equipment.

    (a) No tubing string shall be placed in service or continue to be 
used unless such tubing string has the necessary strength and pressure 
integrity and is otherwise suitable for its intended use.
    (b) In the event of prolonged operations such as milling, fishing, 
jarring, or washing over that could damage the casing, the casing shall 
be pressure-tested, calipered, or otherwise evaluated every 30 days and 
the results submitted to the District Supervisor.
    (c) When the tree is installed, the wellhead shall be equipped so 
that all annuli can be monitored for sustained pressure. If sustained 
casing pressure is observed on a well, the lessee shall immediately 
notify the District Supervisor.
    (d) Wellhead, tree, and related equipment shall have a pressure 
rating greater than the shut-in tubing pressure and shall be designed, 
installed, used, maintained, and tested so as to achieve and maintain 
pressure control. New wells completed as flowing or gas-lift wells shall 
be equipped with a minimum of one master valve and one surface safety 
valve, installed above the master valve, in the vertical run of the 
tree.
    (e) Subsurface safety equipment shall be installed, maintained, and 
tested in compliance with Sec. 250.121 of this part.

[53 FR 10690, Apr. 1, 1988, as amended at 55 FR 47753 Nov. 15, 1990]



             Subpart F--Oil and Gas Well-Workover Operations



Sec. 250.90  General requirements.

    Well-workover operations shall be conducted in a manner to protect 
against harm or damage to life (including fish and other aquatic life), 
property, natural resources of the Outer Continental Shelf (OCS) 
including any mineral deposits (in areas leased and not leased), the 
national security or defense, or the marine, coastal, or human 
environment.



Sec. 250.91  Definitions.

    When used in this subpart, the following terms shall have the 
meanings given below:
    Routine operations mean any of the following operations conducted on 
a well with the tree installed:
    (a) Cutting paraffin;
    (b) Removing and setting pump-through-type tubing plugs, gas-lift 
valves, and subsurface safety valves which can be removed by wireline 
operations;
    (c) Bailing sand;
    (d) Pressure surveys;
    (e) Swabbing;
    (f) Scale or corrosion treatment;
    (g) Caliper and gauge surveys;
    (h) Corrosion inhibitor treatment;
    (i) Removing or replacing subsurface pumps;
    (j) Through-tubing logging (diagnostics);
    (k) Wireline fishing; and
    (l) Setting and retrieving other subsurface flow-control devices.
    Workover operations mean the work conducted on wells after the 
initial completion for the purpose of maintaining or restoring the 
productivity of a well.



Sec. 250.92  Equipment movement.

    The movement of well-workover rigs and related equipment on and off 
a platform or from well to well on the same platform, including rigging 
up and rigging down, shall be conducted in a safe manner. All wells in 
the same well-bay which are capable of producing hydrocarbons shall be 
shut in below the surface with a pump-through-type tubing plug and at 
the surface with a closed master valve prior to moving well-workover 
rigs and related equipment unless otherwise approved by the District 
Supervisor. A closed surface-controlled subsurface safety valve of the 
pump-through-type may be used in lieu of the pump-through-type tubing 
plug provided that the surface control has been locked out of operation. 
The

[[Page 286]]

well to which a well-workover rig or related equipment is to be moved 
shall also be equipped with a back-pressure valve prior to removing the 
tree and installing and testing the blowout-preventer (BOP) system. The 
well from which a well-workover rig or related equipment is to be moved 
shall also be equipped with a back pressure valve prior to removing the 
BOP system and installing the tree. Coiled tubing units, snubbing units, 
or wireline units may be moved onto a platform without shutting in 
wells.



Sec. 250.93  Emergency shutdown system.

    When well-workover operations are conducted on a well with the tree 
removed, an emergency shutdown system (ESD) manually controlled station 
shall be installed near the driller's console or well-servicing unit 
operator's work station, except when there is no other hydrocarbon-
producing well or other hydrocarbon flow on the platform.



Sec. 250.94  Hydrogen sulfide.

    When a well-workover operation is conducted in zones known to 
contain hydrogen sulfide (H2S) or in zones where the presence 
of H2S is unknown (as defined in Sec. 250.67 of this part), 
the lessee shall take appropriate precautions to protect life and 
property on the platform or rig, including but not limited to operations 
such as blowing the well down, dismantling wellhead equipment and flow 
lines, circulating the well, swabbing, and pulling tubing, pumps and 
packers. The lessee shall comply with the requirements in Sec. 250.67 of 
this part as well as the appropriate requirements of this subpart.



Sec. 250.95  Subsea workovers.

    No subsea well-workover operation including routine operations shall 
be commenced until the lessee obtains written approval from the District 
Supervisor in accordance with Sec. 250.103 of this part. That approval 
shall be based upon a case-by-case determination that the proposed 
equipment and procedures will maintain adequate control of the well and 
permit continued safe production operations.



Sec. 250.96  Crew instructions.

    Prior to engaging in well-workover operations, crew members shall be 
instructed in the safety requirements of the operations to be performed, 
possible hazards to be encountered, and general safety considerations to 
protect personnel, equipment, and the environment. Date and time of 
safety meetings shall be recorded and available at the facility for 
review by a Minerals Management Service representative.



Sec. 250.97  Welding and burning practices and procedures.

    All welding, burning, and hot-tapping activities involved in well-
workover operations shall be conducted in accordance with the 
requirements of Sec. 250.52 of this part.



Sec. 250.98  Electrical requirements.

    All electrical equipment and systems involved in well-workover 
operations shall be designed, installed, equipped, protected, operated, 
and maintained in accordance with the requirements in Sec. 250.53 of 
this part.



Sec. 250.99  Well-workover structures on fixed platforms.

    Derricks, masts, substructures, and related equipment shall be 
selected, designed, installed, used, and maintained so as to be adequate 
for the potential loads and conditions of loading that may be 
encountered during the operations proposed. Prior to moving a well-
workover rig or well-servicing equipment onto a platform, the lessee 
shall determine the structural capability of the platform to safely 
support the equipment and proposed operations, taking into consideration 
the corrosion protection, age of the platform, and previous stresses to 
the platform.



Sec. 250.100  Diesel engine air intakes.

    No later than May 31, 1989, diesel engine air intakes shall be 
equipped with a device to shut down the diesel engine in the event of 
runaway. Diesel engines which are continuously attended shall be 
equipped with either remote operated manual or automatic shutdown 
devices. Diesel engines which are not continuously attended shall be

[[Page 287]]

equipped with automatic shutdown devices.

[53 FR 10690, Apr. 1, 1988, as amended at 54 FR 50616, Dec. 8, 1989]



Sec. 250.101  Traveling-block safety device.

    After May 31, 1989, all units being used for well-workover 
operations which have both a traveling block and a crown block shall be 
equipped with a safety device which is designed to prevent the traveling 
block from striking the crown block. The device shall be checked for 
proper operation weekly and after each drill-line slipping operation. 
The results of the operational check shall be entered in the operations 
log.



Sec. 250.102  Field well-workover rules.

    When geological and engineering information available in a field 
enables the District Supervisor to determine specific operating 
requirements, field well-workover rules may be established on the 
District Supervisor's initiative or in response to a request from a 
lessee. Such rules may modify the specific requirements of this subpart. 
After field well-workover rules have been established, well-workover 
operations in the field shall be conducted in accordance with such rules 
and other requirements of this subpart. Field well-workover rules may be 
amended or canceled for cause at any time upon the initiative of the 
District Supervisor or upon the request of a lessee.



Sec. 250.103  Approval and reporting for well-workover operations.

    (a) No well-workover operation except routine ones, as defined in 
Sec. 250.91 of this part, shall begin until the lessee receives written 
approval from the District Supervisor. Approval for such operations 
shall be requested on Form MMS-124, Sundry Notices and Reports on Wells.
    (b) The following information shall be submitted with Form MMS-124:
    (1) A brief description of the well-workover procedures to be 
followed, a statement of the expected surface pressure, and type and 
weight of workover fluids;
    (2) When changes in existing subsurface equipment are proposed, a 
schematic drawing of the well showing the zone proposed for workover and 
the workover equipment to be used; and
    (3) Where the well-workover is in a zone known to contain 
H2S or a zone where the presence of H2S is 
unknown, information pursuant to Sec. 250.67 of this part.
    (c) The following additional information shall be submitted with 
Form MMS-124 if completing to a new zone is proposed:
    (1) Reason for abandonment of present producing zone including 
supportive well test data, and
    (2) A statement of anticipated or known pressure data for the new 
zone.
    (d) Within 30 days after completing the well-workover operation, 
except routine operations, Form MMS-124, Sundry Notices and Reports on 
Wells, shall be submitted to the District Supervisor, showing the work 
as performed. In the case of a well-workover operation resulting in the 
initial recompletion of a well into a new zone, a Form MMS-125, Well 
Summary Report, shall be submitted to the District Supervisor and shall 
include a new schematic of the tubing subsurface equipment if any 
subsurface equipment has been changed.

[53 FR 10690, Apr. 1, 1988, as amended at 58 FR 49928, Sept. 24, 1993]



Sec. 250.104  Well-control fluids, equipment, and operations.

    The following requirements apply during all well-workover operations 
with the tree removed:
    (a) Well-control fluids, equipment, and operations shall be 
designed, utilized, maintained, and/or tested as necessary to control 
the well in foreseeable conditions and circumstances, including 
subfreezing conditions. The well shall be continuously monitored during 
well-workover operations and shall not be left unattended at anytime 
unless the well is shut in and secured.
    (b) When coming out of the hole with drill pipe or a workover 
string, the annulus shall be filled with well-control fluid before the 
change in such fluid level decreases the hydrostatic pressure 75 pounds 
per square inch (psi) or every five stands of drill pipe or workover 
string, whichever gives a lower decrease in hydrostatic pressure.

[[Page 288]]

The number of stands of drill pipe or workover string and drill collars 
that may be pulled prior to filling the hole and the equivalent well-
control fluid volume shall be calculated and posted near the operator's 
station. A mechanical, volumetric, or electronic device for measuring 
the amount of well-control fluid required to fill the hold shall be 
utilized.
    (c) The following well-control-fluid equipment shall be installed, 
maintained, and utilized:
    (1) A fill-up line above the uppermost BOP;
    (2) A well-control, fluid-volume measuring device for determining 
fluid volumes when filling the hole on trips; and
    (3) A recording mud-pit-level indicator to determine mud-pit-volume 
gains and losses. This indicator shall include both a visual and an 
audible warning device.



Sec. 250.105  Blowout prevention equipment.

    (a) The BOP system, system components and related well-control 
equipment shall be designed, used, maintained, and tested in a manner 
necessary to assure well control in foreseeable conditions and 
circumstances, including subfreezing conditions. The working pressure 
rating of the BOP system and system components shall exceed the expected 
surface pressure to which they may be subjected. If the expected surface 
pressure exceeds the rated working pressure of the annular preventer, 
the lessee shall submit with Form MMS-124, requesting approval of the 
well-workover operation, a well-control procedure that indicates how the 
annular preventer will be utilized, and the pressure limitations that 
will be applied during each mode of pressure control.
    (b) The minimum BOP system for well-workover operations with the 
tree removed shall include of the following:
    (1) Three preventers, when the expected surface pressure is less 
than 5,000 psi, consisting of an annular preventer, one preventer 
equipped with pipe rams, and one preventer equipped with blind or blind-
shear rams.
    (2) Four preventers, when the expected surface pressure is 5,000 psi 
or greater, or for multiple tubing strings consisting of an annular 
preventer, two preventers equipped with pipe rams, and one preventer 
equipped with blind or blind-shear rams. When dual tubing strings are 
being handled simultaneously, dual pipe rams shall be installed on one 
of the pipe-ram preventers.
    (3) When a tapered drill string is used, the minimum BOP system 
shall include either of the following:
    (i) Four preventers, when the expected surface pressure is less than 
5,000 psi, consisting of an annular preventer, two sets of pipe rams, 
one capable of sealing around the larger size drill string, and one 
capable of sealing around the smaller size drill string (one set of 
variable bore rams may be substituted for the two sets of pipe rams), 
and one preventer equipped with blind or blind-shear rams; or
    (ii) Five preventers, when the expected surface pressure is 5,000 
psi or greater, consisting of an annular preventer, two sets of pipe 
rams capable of sealing around the larger size drill string, one set of 
pipe rams capable of sealing around the smaller size drill string (one 
set of variable bore rams may be substituted for one set of pipe rams 
capable of sealing around the larger size drill string and the set of 
pipe rams capable of sealing around the smaller size drill string), and 
a preventer equipped with blind or blind-shear rams.
    (c) The BOP systems for well-workover operations with the tree 
removed shall be equipped with the following:
    (1) A hydraulic-actuating system that provides sufficient 
accumulator capacity to supply 1.5 times the volume necessary to close 
all BOP equipment units with a minimum pressure of 200 psi above the 
precharge pressure without assistance from a charging system. No later 
than December 1, 1988, accumulator regulators supplied by rig air and 
without a secondary source of pneumatic supply, shall be equipped with 
manual overrides, or alternately, other devices provided to ensure 
capability of hydraulic operations if rig air is lost;
    (2) A secondary power source, independent from the primary power

[[Page 289]]

source, with sufficient capacity to close all BOP system components and 
hold them closed;
    (3) Locking devices for the pipe-ram preventers;
    (4) At least one remote BOP-control station and one BOP-control 
station on the rig floor; and
    (5) A choke line and a kill line each equipped with two full opening 
valves and a choke manifold. At least one of the valves on the choke-
line shall be remotely controlled. At least one of the valves on the 
kill line shall be remotely controlled, except that a check valve on the 
kill line in lieu of the remotely controlled valve may be installed 
provided two readily accessible manual valves are in place and the check 
valve is placed between the manual valves and the pump. This equipment 
shall have a pressure rating at least equivalent to the ram preventers.
    (d) The minimum BOP-system components for well-workover operations 
with the tree in place and performed through the wellhead inside of 
conventional tubing using small-diameter jointed pipe (usually \3/4\ 
inch to 1\1/4\ inch) as a work string, i.e., small-tubing operations, 
shall include the following:
    (1) Two sets of pipe rams, and
    (2) One set of blind rams.
    (e) The minimum BOP-system components for well-workover operations 
with the tree in place and performed by manipulating spooled, nonjointed 
pipe through the wellhead, i.e., coiled-tubing operations, shall include 
the following:
    (1) One set of pipe rams hydraulically operated,
    (2) One two-way slip assembly hydraulically operated,
    (3) One pipe-cutter assembly hydraulically operated,
    (4) One set of blind rams hydraulically operated,
    (5) One pipe-stripper assembly, and
    (6) One spool with side outlets.
    (f) The minimum BOP-system components for well-workover operations 
with the tree in place and performed by moving tubing or drill pipe in 
or out of a well under pressure utilizing equipment specifically 
designed for that purpose, i.e., snubbing operations, shall include the 
following:
    (1) One set of pipe rams hydraulically operated, and
    (2) Two sets of stripper-type pipe rams hydraulically operated with 
spacer spool.
    (g) An inside BOP or a spring-loaded, back-pressure safety valve and 
an essentially full-opening, work-string safety valve in the open 
position shall be maintained on the rig floor at all times during well-
workover operations when the tree is removed or during well-workover 
operations with the tree installed and using small tubing as the work 
string. A wrench to fit the work-string safety valve shall be readily 
available. Proper connections shall be readily available for inserting 
valves in the work string. The full-opening safety valve is not required 
for coiled tubing or snubbing operations.

[53 FR 10690, Apr. 1, 1988, as amended at 54 FR 50616, Dec. 8, 1989; 58 
FR 49928, Sept. 24, 1993]



Sec. 250.106  Blowout preventer system testing, records, and drills.

    (a) Prior to conducting high-pressure tests, all BOP system 
components shall be successfully tested to a low pressure of 200 to 300 
psi. Ram-type BOP's, related control equipment, including the choke and 
kill manifolds, and safety valves shall be successfully tested to the 
rated working pressure of the BOP equipment or as otherwise approved by 
the District Supervisor. Variable bore rams shall be pressure-tested 
against all sizes of drill pipe in the well excluding drill collars. 
Surface BOP systems shall be pressure tested with water. The annular-
type BOP shall be successfullly tested at 70 percent of its rated 
working pressure or as otherwise approved by the District Supervisor. 
Each valve in the choke and kill manifolds shall be successfully, 
sequentially pressure tested to the ram-type BOP test pressure.
    (b) The BOP systems shall be tested at the following times:
    (1) When installed;
    (2) At least every 7 days, alternating between control stations and 
at staggered intervals to allow each crew to operate the equipment. If 
either control system is not functional, further operations shall be 
suspended until the nonfunctional, system is operable. The

[[Page 290]]

test every 7 days is not required for blind or blind-shear rams. The 
blind or blind-shear rams shall be tested at least once every 30 days 
during operation. A longer period between blowout preventer tests is 
allowed when there is a stuck pipe or pressure-control operation and 
remedial efforts are being performed. The tests shall be conducted as 
soon as possible and before normal operations resume. The reason for 
postponing testing shall be entered into the operations log.
    (3) Following repairs that require disconnecting a pressure seal in 
the assembly, the affected seal will be pressure tested.
    (c) All personnel engaged in well-workover operations shall 
participate in a weekly BOP drill to familiarize crew members with 
appropriate safety measures.
    (d) The lessee shall record pressure conditions during BOP tests on 
pressure charts, unless otherwise approved by the District Supervisor. 
The test interval for each BOP component tested shall be sufficient to 
demonstrate that the component is effectively holding pressure. The 
charts shall be certified as correct by the operator's representative at 
the facility.
    (e) The time, date, and results of all pressure tests, actuations, 
inspections, and crew drills of the BOP system, system components, and 
marine risers shall be recorded in the operations log. The BOP tests 
shall be documented in accordance with the following:
    (1) The documentation shall indicate the sequential order of BOP and 
auxiliary equipment testing and the pressure and duration of each test. 
As an alternate, the documentation in the operations log may reference a 
BOP test plan that contains the required information and is retained on 
file at the facility.
    (2) The control station used during the test shall be identified in 
the operations log. For a subsea system, the pod used during the test 
shall be identified in the operations log.
    (3) Any problems or irregularities observed during BOP and auxiliary 
equipment testing and any actions taken to remedy such problems or 
irregularities shall be noted in the operations log.
    (4) Documentation required to be entered in the operation log may 
instead be referenced in the operations log. All records including 
pressure charts, operations log, and referenced documents pertaining to 
BOP tests, actuations, and inspections, shall be available for MMS 
review at the facility for the duration of well-workover activity. 
Following completion of the well-workover actity, all such records shall 
be retained for a period of 2 years at the facility, at the lessee's 
filed office nearest the OCS facility, or at another location 
conveniently available to the District Supervisor.

[53 FR 10690, Apr. 1, 1988, as amended at 54 FR 50617, Dec. 8, 1989; 56 
FR 1915, Jan. 18, 1991]



Sec. 250.107  Tubing and wellhead equipment.

    The lessee shall comply with the following requirements during well-
workover operations with the tree removed:
    (a) No tubing string shall be placed in service or continue to be 
used unless such tubing string has the necessary strength and pressure 
integrity and is otherwise suitable for its intended use.
    (b) In the event of prolonged operations such as milling, fishing, 
jarring, or washing over that could damage the casing, the casing shall 
be pressure tested, calipered, or otherwise evaluated every 30 days and 
the results submitted to the District Supervisor.
    (c) When reinstalling the tree, the wellhead shall be equiped so 
that all annuli can be monitored for sustained pressure. If sustained 
casing pressure is observed on a well, the lessee shall immediately 
notify the District Supervisor.
    (d) Wellhead, tree, and related equipment shall have a pressure 
rating greater than the shut-in tubing pressure and shall be designed, 
installed, used, maintained, and tested so as to achieve and maintain 
pressure control. The tree shall be equipped with a minimum of one 
master valve and one surface safety valve in the vertical run of the 
tree when it is reinstalled.

[[Page 291]]

    (e) Subsurface safety equipment shall be installed, maintained, and 
tested in compliance with Sec. 250.121 of this part.

[53 FR 10690, Apr. 1, 1988, as amended at 54 FR 50617, Dec. 8, 1989; 55 
FR 47753, Nov. 15, 1990]



Sec. 250.108  Wireline operations.

    The lessee shall comply with the following requirements during 
routine, as defined in Sec. 250.91 of this part, and nonroutine wireline 
workover operations:
    (a) Wireline operations shall be conducted so as to minimize leakage 
of well fluids. Any leakage that does occur shall be contained to 
prevent pollution.
    (b) All wireline perforating operations and all other wireline 
operations where communication exists between the completed hydrocarbon-
bearing zone(s) and the wellbore shall use a lubricator assembly 
containing at least one wireline valve.
    (c) When the lubricator is initially installed on the well, it shall 
be successfully pressure tested to the expected shut-in surface 
pressure.



                     Subpart G--Abandonment of Wells



Sec. 250.110  General requirements.

    (a) The lessee shall abandon all wells in a manner to assure 
downhole isolation of hydrocarbon zones, protection of freshwater 
aquifers, clearance of sites so as to avoid conflict with other uses of 
the Outer Continental Shelf (OCS), and prevention of migration of 
formation fluids within the wellbore or to the seafloor. Any well which 
is no longer used or useful for lease operations shall be plugged and 
abandoned in accordance with the provisions of this subpart. However, no 
production well shall be abandoned until its lack of capacity for 
further profitable production of oil, gas, or sulphur has been 
demonstrated to the satisfaction of the District Supervisor. No well 
shall be plugged if the plugging operations would jeopardize safe and 
economic operations of nearby wells, unless the well poses a hazard to 
safety or the environment.
    (b) Lessees must plug and abandon all well bores, remove all 
platforms or other facilities, and clear the ocean of all obstructions 
to other users. This obligation:
    (1) Accrues to the lessee when the well is drilled, the platform or 
other facility is installed, or the obstruction is created; and
    (2) Is the joint and several responsibility of all lessees and 
owners of operating rights under the lease at the time the obligation 
accrues, and of each future lessee or owner of operating rights, until 
the obligation is satisfied under the requirements of this part.

[53 FR 10690, Apr. 1, 1988, as amended at 62 FR 27955, May 22, 1997]

    Effective Date Note: At 62 FR 27955, May 22, 1997, Sec. 250.110 was 
amended by designating the existing text as paragraph (a) and adding a 
new paragraph (b), effective Aug. 20, 1997.



Sec. 250.111  Approvals.

    The lessee shall not commence abandonment operations without prior 
approval of the District Supervisor. The lessee shall submit a request 
on Form MMS-124, Sundry Notices and Reports on Wells, for approval to 
abandon a well and a subsequent report of abandonment within 30 days 
from completion of the work in accordance with the following:
    (a) Notice of Intent to Abandon Well. A request for approval to 
abandon a well shall contain the reason for abandonment including 
supportive well logs and test data, a description and schematic of 
proposed work including depths, type, location, length of plugs, the 
plans for mudding, cementing, shooting, testing, casing removal, and 
other pertinent information.
    (b) Subsequent report of abandonment. The subsequent report of 
abandonment shall include a description of the manner in which the 
abandonment or plugging work was accomplished, including the nature and 
quantities of materials used in the plugging, and all information listed 
in paragraph (a) of this section with a revised schematic. If an attempt 
was made to cut and pull any casing string, the subsequent report shall 
include a description of the methods used, size of casing removed, depth 
of the casing removal point, and the

[[Page 292]]

amount of the casing removed from the well.

[53 FR 10690, Apr. 1, 1988, as amended at 58 FR 49928, Sept. 24, 1993]



Sec. 250.112  Permanent abandonment.

    (a) Isolation of zones in open hole. In uncased portions of wells, 
cement plugs shall be set to extend from a minimum of 100 feet below the 
bottom to 100 feet above the top of any oil, gas, or freshwater zones to 
isolate fluids in the strata in which they are found and to prevent them 
from escaping into other strata or to the seafloor. The placement of 
additional cement plugs to prevent the migration of formation fluids in 
the wellbore may be required by the District Supervisor.
    (b) Isolation of open hole. Where there is an open hole below the 
casing, a cement plug shall be placed in the deepest casing by the 
displacement method and shall extend a minimum of 100 feet above and 100 
feet below the casing shoe. In lieu of setting a cement plug across the 
casing shoe, the following methods are acceptable:
    (1) A cement retainer and a cement plug shall be set. The cement 
retainer shall have effective back-pressure control and shall be set not 
less than 50 feet and not more than 100 feet above the casing shoe. The 
cement plug shall extend at least 100 feet below the casing shoe and at 
least 50 feet above the retainer.
    (2) If lost circulation conditions have been experienced or are 
anticipated, a permanent-type bridge plug may be placed within the first 
150 feet above the casing shoe with a minimum of 50 feet of cement on 
top of the bridge plug. This bridge plug shall be tested in accordance 
with paragraph (g) of this section.
    (c) Plugging or isolating perforated intervals. A cement plug shall 
be set by the displacement method opposite all perforations which have 
not been squeezed with cement. The cement plug shall extend a minimum of 
100 feet above the perforated interval and either 100 feet below the 
perforated interval or down to a casing plug, whichever is the lesser. 
In lieu of setting a cement plug by the displacement method, the 
following methods are acceptable, provided the perforations are isolated 
from the hole below:
    (1) A cement retainer and a cement plug shall be set. The cement 
retainer shall have effective back-pressure control and shall be set not 
less than 50 feet and not more than 100 feet above the top of the 
perforated interval. The cement plug shall extend at least 100 feet 
below the bottom of the perforated interval with 50 feet placed above 
the retainer.
    (2) A permanent-type bridge plug shall be set within the first 150 
feet above the top of the perforated interval with at least 50 feet of 
cement on top of the bridge plug.
    (3) A cement plug which is at least 200 feet long shall be set by 
the displacement method with the bottom of the plug within the first 100 
feet above the top of the perforated interval.
    (d) Plugging of casing stubs. If casing is cut and recovered leaving 
a stub, the stub shall be plugged in accordance with one of the 
following methods:
    (1) A stub terminating inside a casing string shall be plugged with 
a cement plug extending at least 100 feet above and 100 feet below the 
stub. In lieu of setting a cement plug across the stub, the following 
methods are acceptable:
    (i) A cement retainer or a permanent-type bridge plug shall be set 
not less than 50 feet above the stub and capped with at least 50 feet of 
cement, or
    (ii) A cement plug which is at least 200 feet long shall be set with 
the bottom of the plug within 100 feet above the stub.
    (2) If the stub is below the next larger string, plugging shall be 
accomplished as required to isolate zones or to isolate an open hole as 
described in paragraphs (a) and (b) of this section.
    (e) Plugging of annular space. Any annular space communicating with 
any open hole and extending to the mud line shall be plugged with at 
least 200 feet of cement.
    (f) Surface plug. A cement plug which is at least 150 feet in length 
shall be set with the top of the plug within the first 150 feet below 
the mud line. The plug shall be placed in the smallest string of casing 
which extends to the mud line.

[[Page 293]]

    (g) Testing of plugs. The setting and location of the first plug 
below the surface plug shall be verified by one of the following 
methods:
    (1) The lessee shall place a minimum pipe weight of 15,000 pounds on 
the cement plug, cement retainer, or bridge plug. The cement placed 
above the bridge plug or retainer is not required to be tested.
    (2) The lessee shall test the plug with a minimum pump pressure of 
1,000 pounds per square inch with a result of no more than a 10-percent 
pressure drop during a 15-minute period.
    (h) Fluid left in hole. Each of the respective intervals of the hole 
between the various plugs shall be filled with fluid of sufficient 
density to exert a hydrostatic pressure exceeding the greatest formation 
pressure in the intervals between the plugs at time of abandonment.
    (i) Clearance of location. All wellheads, casings, pilings, and 
other obstructions shall be removed to a depth of at least 15 feet below 
the mud line or to a depth approved by the District Supervisor. The 
lessee shall verify that the location has been cleared of all 
obstructions in accordance with Sec. 250.114 of this part. The 
requirement for removing subsea wellheads or other obstructions and for 
verifying location clearance may be reduced or eliminated when, in the 
opinion of the District Supervisor, the wellheads or other obstructions 
would not constitute a hazard to other users of the seafloor or other 
legitimate uses of the area.
    (j) Requirements for permafrost areas. The following requirements 
shall be implemented for permafrost areas:
    (1) Fluid left in the hole adjacent to permafrost zones shall have a 
freezing point below the temperature of the permafrost and shall be 
treated to inhibit corrosion.
    (2) The cement used for cement plugs placed across permafrost zones 
shall be designed to set before freezing and to have a low heat of 
hydration.



Sec. 250.113  Temporary abandonment.

    (a) Any drilling well which is to be temporarily abandoned shall 
meet the requirements for permanent abandonment (except for the 
provisions in Secs. 250.112 (f) and (i), and 250.114) and the following:
    (1) A bridge plug or a cement plug at least 100 feet in length shall 
be set at the base of the deepest casing string unless the casing string 
has been cemented and has not been drilled out. If a cement plug is set, 
it is not necessary for the cement plug to extend below the casing shoe 
into the open hole.
    (2) A retrievable or a permanent-type bridge plug or a cement plug 
at least 100 feet in length, shall be set in the casing within the first 
200 feet below the mud line.
    (b) Subsea wellheads, casing stubs, or other obstructions above the 
seafloor remaining after temporary abandonment will be protected in such 
a manner as to allow commercial fisheries gear to pass over the 
structure without damage to the structure or fishing gear. Depending on 
water depth, nature and height of obstruction above the seafloor, and 
the types and periods of fishing activity in the area, the District 
Supervisor may waive this requirement.
    (c) In order to maintain the temporarily abandoned status of a well, 
the lessee shall provide, within 1 year of the original temporary 
abandonment and at successive 1-year intervals thereafter, an annual 
report describing plans for reentry to complete or permanently abandon 
the well.
    (d) Identification and reporting of subsea wellheads, casing stubs, 
or other obstructions extending above the mud line will be accomplished 
in accordance with the requirements of the U.S. Coast Guard.



Sec. 250.114  Site clearance verification.

    (a) The lessees shall verify site clearance after abandonment by one 
or more of the following methods as approved by the District Supervisor:
    (1) Drag a trawl in two directions across the location,
    (2) Perform a diver search around the wellbore,
    (3) Scan across the location with a side-scan or on-bottom scanning 
sonar, or
    (4) Use other methods based on particular site conditions.
    (b) Certification that the area was cleared of all obstructions, the 
date the

[[Page 294]]

work was performed, the extent of the area searched around the location, 
and the search method utilized shall be submitted on Form MMS-124.

[53 FR 10690, Apr. 1, 1988, as amended at 58 FR 49928, Sept. 24, 1993]



            Subpart H--Oil and Gas Production Safety Systems



Sec. 250.120  General requirements.

    Production safety equipment shall be designed, installed, used, 
maintained, and tested in a manner to assure the safety and protection 
of the human, marine, and coastal environments. Production safety 
systems operated in subfreezing climates shall utilize equipment and 
procedures selected with consideration of floating ice, icing, and other 
extreme environmental conditions that may occur in the area. Production 
shall not commence until the production safety system has been approved 
and a preproduction inspection has been requested by the lessee.



Sec. 250.121  Subsurface safety devices.

    (a) General. All tubing installations open to hydrocarbon-bearing 
zones shall be equipped with subsurface safety devices that will shut 
off the flow from the well in the event of an emergency unless, after 
application and justification, the well is determined by the District 
Supervisor to be incapable of natural flowing. These devices may consist 
of a surface-controlled subsurface safety valve (SSSV), a subsurface-
controlled SSSV, an injection valve, a tubing plug, or a tubing/annular 
subsurface safety device, and any associated safety valve lock or 
landing nipple.
    (b) Specifications for SSSV's. Surface-controlled and subsurface-
controlled SSSV's and safety valve locks and landing nipples installed 
in the OCS shall conform to the requirements in Sec. 250.126 of this 
part.
    (c) Surface-controlled SSSV's. All tubing installations open to a 
hydrocarbon-bearing zone which is capable of natural flow shall be 
equipped with a surface-controlled SSSV, except as specified in 
paragraphs (d), (f), and (g) of this section. The surface controls may 
be located on the site or a remote location. Wells not previously 
equipped with a surface-controlled SSSV and wells in which a surface-
controlled SSSV has been replaced with a subsurface-controlled SSSV in 
accordance with paragraph (d)(2) of this section shall be equipped with 
a surface-controlled SSSV when the tubing is first removed and 
reinstalled.
    (d) Subsurface-controlled SSSV's. Wells may be equipped with 
subsurface-controlled SSSV's in lieu of a surface-controlled SSSV 
provided the lessee demonstrates to the District Supervisor's 
satisfaction that one of the following criteria are met:
    (1) Wells not previously equipped with surface-controlled SSSV's 
shall be so equipped when the tubing is first removed and reinstalled,
    (2) The subsurface-controlled SSSV is installed in wells completed 
from a single-well or multiwell satellite caisson or seafloor 
completions, or
    (3) The subsurface-controlled SSSV is installed in wells with a 
surface-controlled SSSV that has become inoperable and cannot be 
repaired without removal and reinstallation of the tubing.
    (e) Design, installation, and operation of SSSV's. The SSSV's shall 
be designed, installed, operated, and maintained to ensure reliable 
operation.
    (1) The device shall be installed at a depth of 100 feet or more 
below the seafloor within 2 days after production is established. When 
warranted by conditions such as permafrost, unstable bottom conditions, 
hydrate formation, or paraffins, an alternate setting depth of the 
subsurface safety device may be approved by the District Supervisor.
    (2) Until a subsurface safety device is installed, the well shall be 
attended in the immediate vicinity so that emergency actions may be 
taken while the well is open to flow. During testing and inspection 
procedures, the well shall not be left unattended while open to 
production unless a properly operating subsurface-safety device has been 
installed in the well.
    (3) The well shall not be open to flow while the subsurface safety 
device is removed, except when flowing of the well is necessary for a 
particular operation such as cutting paraffin, bailing sand, or similar 
operations.

[[Page 295]]

    (4) All SSSV's shall be inspected, installed, maintained, and tested 
in accordance with American Petroleum Institute Recommended Practice 
14B, Recommended Practice for Design, Installation, and Operation of 
Subsurface Safety Valve Systems.
    (f) Subsurface safety devices in shut-in wells. New completions 
(perforated but not placed on production) and completions shut in for a 
period of 6 months shall be equipped with either (1) a pump-through-type 
tubing plug; (2) a surface-controlled SSSV, provided the surface control 
has been rendered inoperative; or (3) an injection valve capable of 
preventing backflow. The setting depth of the subsurface safety device 
shall be approved by the District Supervisor on a case-by-case basis, 
when warranted by conditions such as permafrost, unstable bottom 
conditions, hydrate formations, and paraffins.
    (g) Subsurface safety devices in injection wells. A surface-
controlled SSSV or an injection valve capable of preventing backflow 
shall be installed in all injection wells. This requirement is not 
applicable if the District Supervisor concurs that the well is incapable 
of flowing. The lessee shall verify the no-flow condition of the well 
annually.
    (h) Temporary removal for routine operations. (1) Each wireline- or 
pumpdown-retrievable subsurface safety device may be removed, without 
further authorization or notice, for a routine operation which does not 
require the approval of a Form MMS-124, Sundry Notices and Reports on 
Wells, in Sec. 250.91 of this part for a period not to exceed 15 days.
    (2) The well shall be identified by a sign on the wellhead stating 
that the subsurface safety device has been removed. The removal of the 
subsurface safety device shall be noted in the records as required in 
Sec. 250.124(b) of this part. If the master valve is open, a trained 
person shall be in the immediate vicinity of the well to attend the well 
so that emergency actions may be taken, if necessary.
    (3) A platform well shall be monitored, but a person need not remain 
in the well-bay area continuously if the master valve is closed. If the 
well is on a satellite structure, it must be attended or a pump-through 
plug installed in the tubing at least 100 feet below the mud line and 
the master valve closed, unless otherwise approved by the District 
Supervisor.
    (4) The well shall not be allowed to flow while the subsurface 
safety device is removed, except when flowing the well is necessary for 
that particular operation. The provisions of this paragraph are not 
applicable to the testing and inspection procedures in Sec. 250.124 of 
this part.
    (i) Additional safety equipment. All tubing installations in which a 
wireline- or pumpdown-retrievable subsurface safety device is installed 
after the effective date of this subpart shall be equipped with a 
landing nipple with flow couplings or other protective equipment above 
and below to provide for the setting of the SSSV. The control system for 
all surface-controlled SSSV's shall be an integral part of the platform 
Emergency Shutdown System (ESD). In addition to the activation of the 
ESD by manual action on the platform, the system may be activated by a 
signal from a remote location. Surface-controlled SSSV's shall close in 
response to shut-in signals from the ESD and in response to the fire 
loop or other fire detection devices.
    (j) Emergency action. In the event of an emergency, such as an 
impending storm, any well not equipped with a subsurface safety device 
and which is capable of natural flow shall have the device properly 
installed as soon as possible with due consideration being given to 
personnel safety.

[53 FR 10690, Apr. 1, 1988, as amended at 54 FR 50617, Dec. 8, 1989; 58 
FR 49928, Sept. 24, 1993]



Sec. 250.122  Design, installation, and operation of surface production-safety systems.

    (a) General. All production facilities, including separators, 
treaters, compressors, headers, and flowlines shall be designed, 
installed, and maintained in a manner which provides for efficiency, 
safety of operation, and protection of the environment.
    (b) Platforms. All platform production facilities shall be protected 
with a

[[Page 296]]

basic and ancillary surface safety system designed, analyzed, installed, 
tested, and maintained in operating condition in accordance with the 
provisions of API RP 14C, Recommended Practice for Analysis, Design, 
Installation and Testing of Basic Surface Safety Systems for Offshore 
Production Platforms. If processing components are to be utilized, other 
than those for which Safety Analysis Checklists are included in API RP 
14C, the analysis technique and documentation specified therein shall be 
utilized to determine the effects and requirements of these components 
upon the safety system. Safety device requirements for pipelines are 
contained in Sec. 250.154 of this part.
    (c) Specification for surface safety valves (SSV) and underwater 
safety valves (USV). All wellhead SSV's, USV's, and their actuators 
which are installed in the OCS shall conform to the requirements in 
Sec. 250.126 of this part.
    (d) Use of SSV's and USV's. All SSV's and USV's shall be inspected, 
installed, maintained, and tested in accordance with API RP 14H, 
Recommended Practice for Use of Surface Safety Valves and Underwater 
Safety Valves Offshore. If any SSV or USV does not operate properly or 
if any fluid flow is observed during the leakage test, the valve shall 
be repaired or replaced.
    (e) Approval of safety-systems design and installation features. 
Prior to installation, the lessee shall submit, in duplicate for 
approval to the District Supervisor a production safety system 
application containing information relative to design and installation 
features. Information concerning approved design and installation 
features shall be maintained by the lessee at the lessee's offshore 
field office nearest the OCS facility or other location conveniently 
available to the District Supervisor. All approvals are subject to field 
verifications. The application shall include the following:
    (1) A schematic flow diagram showing tubing pressure, size, 
capacity, design working pressure of separators, flare scrubbers, 
treaters, storage tanks, compressors, pipeline pumps, metering devices, 
and other hydrocarbon-handling vessels.
    (2) A schematic flow diagram (API RP 14C, Figure E1) and the related 
Safety Analysis Function Evaluation chart (API RP 14C, subsection 4.3c).
    (3) A schematic piping diagram showing the size and maximum 
allowable working pressures as determined in accordance with API RP 14E, 
Design and Installation of Offshore Production Platform Piping Systems.
    (4) Electrical system information including the following:
    (i) A plan for each platform deck outlining all hazardous areas 
classified in accordance with API RP 500, Recommended Practice for 
Classification of Locations for Electrical Installations at Petroleum 
Facilities, and outlining areas in which potential ignition sources, 
other than electrical, are to be installed. The area outlined shall 
include the following information:
    (A) All major production equipment, wells, and other significant 
hydrocarbon sources and a description of the type of decking, ceiling, 
walls (e.g., grating or solid) and firewalls; and
    (B) Location of generators, control rooms, panel boards, major 
cabling/conduit routes, and identification of the primary wiring method 
(e.g., type cable, conduit, or wire).
    (ii) Elementary electrical schematic of any platform safety shut-
down system with a functional legend.
    (5) Certification that the design for the mechanical and electrical 
systems to be installed were approved by registered professional 
engineers. After these systems are installed, the lessee shall submit a 
statement to the District Supervisor certifying that new installations 
conform to the approved designs of this subpart.
    (6) The design and schematics of the installation and maintenance of 
all fire- and gas-detection systems shall include the following:
    (i) Type, location, and number of detection sensors;
    (ii) Type and kind of alarms, including emergency equipment to be 
activated;
    (iii) Method used for detection;
    (iv) Method and frequency of calibration; and

[[Page 297]]

    (v) A functional block diagram of the detection system, including 
the electric power supply.
[53 FR 10690, Apr. 1, 1988, as amended at 61 FR 60024, Nov. 26, 1996]



Sec. 250.123  Additional production system requirements.

    (a) General. Lessees shall comply with the following production 
safety system requirements (some of which are in addition to those 
contained in API RP 14C), incorporated by reference in Sec. 250.122(b) 
of this part.
    (b) Design, installation, and operation of additional production 
systems. (1) Pressure and fired vessels. Pressure and fired vessels 
shall be designed, fabricated, code stamped, and maintained in 
accordance with applicable provisions of sections I, IV, and VIII of the 
ASME Boiler and Pressure Vessel Code. All existing uncoded vessels in 
use must be justified and approval for continued use obtained from the 
District Supervisor no later than August 29, 1988.
    (i) Pressure relief valves shall be designed, installed, and 
maintained in accordance with applicable provisions of sections I, IV, 
and VIII of the ASME Boiler and Pressure Vessel Code. The relief valves 
shall conform to the valve-sizing and pressure-relieving requirements 
specified in these documents; however, the relief valves, except 
completely redundant relief valves, shall be set no higher than the 
maximum-allowable working pressure of the vessel. All relief valves and 
vents shall be piped in such a way as to prevent fluid from striking 
personnel or ignition sources.
    (ii) Steam generators operating at less than 15 pounds per square 
inch gauge (psig) shall be equipped with a level safety low (LSL) sensor 
which will shut off the fuel supply when the water level drops below the 
minimum safe level. Steam generators operating at greater than 15 psig 
require, in addition to an LSL, a water-feeding device which will 
automatically control the water level.
    (iii) The lessee shall use pressure recorders to establish the new 
operating pressure ranges of pressure vessels at any time when there is 
a change in operating pressures that requires new settings for the high-
pressure shut-in sensor and/or the low-pressure shut-in sensor as 
provided herein. The pressure-recorder charts used to determine current 
operating pressure ranges shall be maintained at the lessee's field 
office nearest the OCS facility or at other locations conveniently 
available to the District Supervisor. The high-pressure shut-in sensor 
shall be set no higher than 15 percent or 5 psi, whichever is greater, 
above the highest operating pressure of the vessel. This setting shall 
also be set sufficiently below (5 percent or 5 psi, whichever is 
greater) the relief valve's set pressure to assure that the pressure 
source is shut in before the relief valve activates. The low-pressure 
shut-in sensor shall activate no lower than 15 percent or 5 psi, 
whichever is greater, below the lowest pressure in the operating range. 
The activation of low-pressure sensors on pressure vessels which operate 
at less than 5 psi shall be approved by the District Supervisor on a 
case-by-case basis.
    (2) Flowlines. (i) Flowlines from wells shall be equipped with high- 
and low-pressure shut-in sensors located in accordance with section A.1 
and Figure A1 of API RP 14C. The lessee shall use pressure recorders to 
establish the new operating pressure ranges of flowlines at any time 
when there is a significant change in operating pressures. The most 
recent pressure-recorder charts used to determine operating pressure 
ranges shall be maintained at the lessee's field office nearest the OCS 
facility or at other locations conveniently available to the District 
Supervisor. The high-pressure shut-in sensor(s) shall be set no higher 
than 15 percent or 5 psi, whichever is greater, above the highest 
operating pressure of the line. But in all cases, it shall be set 
sufficiently below the maximum shut-in wellhead pressure or the gas-lift 
supply pressure to assure actuation of the SSV. The low-pressure shut-in 
sensor(s) shall be set no lower than 15 percent or 5 psi, whichever is 
greater, below the lowest operating pressure of the line in which it is 
installed.
    (ii) If a well flows directly to the pipeline before separation, the 
flowline and valves from the well located upstream of and including the 
header inlet valve(s) shall have a working

[[Page 298]]

pressure equal to or greater than the maximum shut-in pressure of the 
well unless the flowline is protected by one of the following:
    (A) A relief valve which vents into the platform flare scrubber or 
some other location approved by the District Supervisor. The platform 
flare scrubber shall be designed to handle, without liquid-hydrocarbon 
carryover to the flare, the maximum-anticipated flow of liquid 
hydrocarbons which may be relieved to the vessel.
    (B) Two SSV's with independent high-pressure sensors installed with 
adequate volume upstream of any block valve to allow sufficient time for 
the valve(s) to close before exceeding the maximum allowable working 
pressure.
    (3) Safety sensors. All shutdown devices, valves, and pressure 
sensors shall function in a manual reset mode. Sensors with integral 
automatic reset shall be equipped with an appropriate device to override 
the automatic reset mode. All pressure sensors shall be equipped to 
permit testing with an external pressure source.
    (4) ESD. The ESD shall conform to the requirements of Appendix C, 
section C1, of API RP 14C, and the following:
    (i) The manually operated ESD valve(s) shall be quick-opening and 
nonrestricted to enable the rapid actuation of the shutdown system. Only 
ESD stations at the boat landing may utilize a loop of breakable 
synthetic tubing in lieu of a valve.
    (ii) Closure of the SSV shall not exceed 45 seconds after automatic 
detection of an abnormal condition or actuation of an ESD. The surface-
controlled SSSV shall close in not more than 2 minutes after the shut-in 
signal has closed the SSV. Design-delayed closure time greater than 2 
minutes shall be justified by the lessee based on the individual well's 
mechanical/production characteristics and be approved by the District 
Supervisor.
    (iii) A schematic of the ESD which indicates the control functions 
of all safety devices for the platforms shall be maintained by the 
lessee on the platform or at the lessee's field office nearest the OCS 
facility or other location conveniently available to the District 
Supervisor.
    (5) Engines. (i) Engine exhaust. Engine exhausts shall be equipped 
to comply with the insulation and personnel protection requirements of 
API RP 14C, section 4.2c(4). Exhaust piping from diesel engines shall be 
equipped with spark arresters.
    (ii) Diesel engine air intake. No later than May 31, 1989, diesel 
engine air intakes shall be equipped with a device to shutdown the 
diesel engine in the event of runaway. Diesel engines which are 
continuously attended shall be equipped with either remote operated 
manual or automatic shutdown devices. Diesel engines which are not 
continuously attended shall be equipped with automatic shutdown devices.
    (6) Glycol dehydration units. A pressure relief system or an 
adequate vent shall be installed on the glycol regenerator (reboiler) 
which will prevent overpressurization. The discharge of the relief valve 
shall be vented in a nonhazardous manner.
    (7) Gas compressors. Compressor installations shall be equipped with 
the following protective equipment as required in API RP 14C, sections 
A4 and A8.
    (i) A Pressure Safety High (PSH), a Pressure Safety Low (PSL), a 
Pressure Safety Valve (PSV), and a Level Safety High (LSH), and an LSL 
to protect each interstage and suction scrubber.
    (ii) A Temperature Safety High (TSH) on each compressor discharge 
cylinder.
    (iii) The PSH and PSL shut-in sensors and LSH shut-in controls 
protecting compressor suction and interstage scrubbers shall be designed 
to actuate automatic shutdown valves (SDV) located in each compressor 
suction and fuel gas line so that the compressor unit and the associated 
vessels can be isolated from all input sources. All automatic SDV's 
installed in compressor suction and fuel gas piping shall also be 
actuated by the shutdown of the prime mover. Unless otherwise approved 
by the District Supervisor, gas-well gas affected by the closure of the 
automatic SDV on a compressor suction shall be diverted to the pipeline 
or shut in at the wellhead.

[[Page 299]]

    (iv) A blowdown valve is required on the discharge line of all 
compressor installations of 1,000 horsepower (746 kilowatts) or greater.
    (8) Firefighting systems. Firefighting systems for both open and 
totally enclosed platforms installed for extreme weather conditions or 
other reasons shall conform to subsection 5.2, Firewater systems, of API 
RP 14G, Fire Prevention and Control Open Type Offshore Production 
Platforms, and shall require approval of the District Supervisor. The 
following additional requirements shall apply for both open- and closed-
production platforms:
    (i) A firewater system consisting of rigid pipe with firehose 
stations or fixed firewater monitors shall be installed. The firewater 
system shall be installed to provide needed protection in all areas 
where production-handling equipment is located. A fixed waterspray 
system shall be installed in enclosed well-bay areas where hydrocarbon 
vapors may accumulate.
    (ii) Fuel or power for firewater pump drivers shall be available for 
at least 30 minutes of run time during a platform shut-in. If necessary, 
an alternate fuel or power supply shall be installed to provide for this 
pump-operating time unless an alternate firefighting system has been 
approved by the District Supervisor.
    (iii) A firefighting system using chemicals may be used in lieu of a 
water system if the District Supervisor determines that the use of a 
chemical system provides equivalent fire-protection control.
    (iv) A diagram of the firefighting system showing the location of 
all firefighting equipment shall be posted in a prominent place on the 
facility or structure.
    (v) For operations in subfreezing climates, the lessee shall furnish 
evidence to the District Supervisor that the firefighting system is 
suitable for the conditions.
    (9) Fire- and gas-detection system. (i) Fire (flame, heat, or smoke) 
sensors shall be installed in all enclosed classified areas. Gas sensors 
shall be installed in all inadequately ventilated, enclosed classified 
areas. Adequate ventilation is defined as ventilation which is 
sufficient to prevent accumulation of significant quantities of vapor-
air mixture in concentrations over 25 percent of the lower explosive 
limit (LEL). One approved method of providing adequate ventilation is a 
change of air volume each 5 minutes or 1 cubic foot of air-volume flow 
per minute per square foot of solid floor area, whichever is greater. 
Enclosed areas (e.g., buildings, living quarters, or doghouses) are 
defined as those areas confined on more than four of their six possible 
sides by walls, floors, or ceilings more restrictive to air flow than 
grating or fixed open louvers and of sufficient size to all entry of 
personnel. A classified area is any area classified Class I, Group D, 
Division 1 or 2, following the guidelines of API RP 500.
    (ii) All detection systems shall be capable of continuous 
monitoring. Fire-detection systems and portions of combustible gas-
detection systems related to the higher gas concentration levels shall 
be of the manual-reset type. Combustible gas-detection systems related 
to the lower gas-concentration level may be of the automatic-reset type.
    (iii) A fuel-gas odorant or an automatic gas-detection and alarm 
system is required in enclosed, continuously manned areas of the 
facility which are provided with fuel gas. Living quarters and doghouses 
not containing a gas source and not located in a classified area do not 
require a gas detection system.
    (iv) The District Supervisor may require the installation and 
maintenance of a gas detector or alarm in any potentially hazardous 
area.
    (v) Fire- and gas-detection systems shall be an approved type, 
designed and installed in accordance with API RP 14C, API RP 14G, and 
API RP 14F, Design and Installation of Electrical Systems for Offshore 
Production Platforms.
    (10) Electrical equipment. Electrical equipment and systems shall be 
designed, installed, and maintained in accordance with the requirements 
in Sec. 250.53 of this part.
    (11) Erosion. A program of erosion control shall be in effect for 
wells or fields having a history of sand production. The erosion-control 
program may include sand probes, X-ray, ultrasonic,

[[Page 300]]

or other satisfactory monitoring methods. Records by lease, indicating 
the wells which have erosion-control programs in effect and the results 
of the programs, shall be maintained by the lessee for a period of 2 
years and shall be made available to MMS upon request.
    (c) General platform operations. (1) Surface or subsurface safety 
devices shall not be bypassed or blocked out of service unless they are 
temporarily out of service for startup, maintenance, or testing 
procedures. Only the minimum number of safety devices shall be taken out 
of service. Personnel shall monitor the bypassed or blocked-out 
functions until the safety devices are placed back in service. Any 
surface or subsurface safety device which is temporarily out of service 
shall be flagged.
    (2) When wells are disconnected from producing facilities and blind 
flanged, equipped with a tubing plug, or the master valves have been 
locked closed, compliance is not required with the provisions of API RP 
14C or this regulation concerning the following:
    (i) Automatic fail-close SSV's on wellhead assemblies, and
    (ii) The PSH and PSL shut-in sensors in flowlines from wells.
    (3) When pressure or atmospheric vessels are isolated from 
production facilities (e.g., inlet valve locked closed or inlet blind-
flanged) and are to remain isolated for an extended period of time, 
safety device compliance with API RP 14C or this subpart is not 
required.
    (4) All open-ended lines connected to producing facilities and wells 
shall be plugged or blind-flanged, except those lines designed to be 
open-ended such as flare or vent lines.
    (d) Welding and burning practices and procedures. All welding, 
burning, and hot-tapping activities shall be conducted according to the 
specific requirements in Sec. 250.52 of this part.

[53 FR 10690, Apr. 1, 1988; 53 FR 12227, Apr. 13, 1988, as amended at 55 
FR 47753, Nov. 15, 1990; 61 FR 60025, Nov. 26, 1996]



Sec. 250.124  Production safety-system testing and records.

    (a) Inspection and testing. The safety-system devices shall be 
successfully inspected and tested by the lessee at the interval 
specified below or more frequently if operating conditions warrant. 
Testing shall be in accordance with API RP 14C, Appendix D, and the 
following:
    (1) Testing requirements for subsurface safety devices are as 
follows:
    (i) Each surface-controlled subsurface safety device installed in a 
well, including such devices in shut-in and injection wells, shall be 
tested in place for proper operation when installed or reinstalled and 
thereafter at intervals not exceeding 6 months. If the device does not 
operate properly, or if a liquid leakage rate in excess of 200 cubic 
centimeters per minute or a gas leakage rate in excess of 5 cubic feet 
per minute is observed, the device shall be removed, repaired and 
reinstalled, or replaced. Testing shall be in accordance with API RP 14B 
to ensure proper operation.
    (ii) Each subsurface-controlled SSSV installed in a well shall be 
removed, inspected, and repaired or adjusted, as necessary, and 
reinstalled or replaced at intervals not exceeding 6 months for those 
valves not installed in a landing nipple and 12 months for those valves 
installed in a landing nipple.
    (iii) Each tubing plug installed in a well shall be inspected for 
leakage by opening the well to possible flow at intervals not exceeding 
6 months. If a liquid leakage rate in excess of 200 cubic centimeters 
per minute or a gas leakage rate in excess of 5 cubic feet per minute is 
observed, the device shall be removed, repaired and reinstalled, or 
replaced. An additional tubing plug may be installed in lieu of removal.
    (iv) Injection valves shall be tested in the manner as outlined for 
testing tubing plugs in paragraph (a)(1)(iii) of this section. Leakage 
rates outlined in paragraph (a)(1)(iii) of this section shall apply.
    (2) All PSV's shall be tested for operation at least once every 12 
months. These valves shall be either bench-tested or equipped to permit 
testing with an external pressure source. Weighted disk vent valves used 
as PSV's on atmospheric tanks may be disassembled and inspected in lieu 
of function testing.
    (3) The following safety devices shall be tested at least once each 
calendar

[[Page 301]]

month, but at no time shall more than 6 weeks elapse between tests:
    (i) All PSH and PSL,
    (ii) All LSH and LSL controls,
    (iii) All automatic inlet SDV's which are actuated by a sensor on a 
vessel or compressor, and
    (iv) All SDV's in liquid discharge lines and actuated by vessel low-
level sensors.
    (4) All SSV's and USV's shall be tested for operation and for 
leakage at least once each calendar month, but at no time shall more 
than 6 weeks elapse between tests. The testing shall be in accordance 
with the test procedures specified in API RP 14H, Section 4, Table 2. If 
the SSV or USV does not operate properly or if any fluid flow is 
observed during the leakage test, the valve shall be repaired or 
replaced.
    (5) All flowline Flow Safety Valves (FSV) shall be checked for 
leakage at least once each calendar month, but at no time shall more 
than 6 weeks elapse between tests. The FSV's shall be tested for leakage 
in accordance with the test procedure specified in API RP 14C, appendix 
D, section D4, table D2, subsection D. If the leakage measured exceeds a 
liquid flow of 200 cubic centimeters per minute or a gas flow of 5 cubic 
feet per minute, the FSV's shall be repaired or replaced.
    (6) The TSH shutdown controls installed on compressor installations 
which can be nondestructively tested shall be tested every 6 months and 
repaired or replaced as necessary.
    (7) All pumps for firewater systems shall be inspected and operated 
weekly.
    (8) All fire- (flame, heat, or smoke) detection systems shall be 
tested for operation and recalibrated every 3 months provided that 
testing can be performed in a nondestructive manner. Open flame or 
devices operating at temperatures which could ignite a methane-air 
mixture shall not be used. All combustible gas-detection systems shall 
be calibrated every 3 months.
    (9) All TSH devices shall be tested at least once every 12 months, 
excluding those addressed in paragraph (a)(6) of this section and those 
which would be destroyed by testing. Burner safety low and flow safety 
low devices shall also be tested at least once every 12 months.
    (10) The ESD shall be tested for operation at least once each 
calendar month, but at no time shall more than 6 weeks elapse between 
tests. The test shall be conducted by alternating ESD stations monthly 
to close at least one wellhead SSV and verify a surface-controlled SSSV 
closure for that well as indicated by control circuitry actuation.
    (11) Prior to the commencement of production, the lessee shall 
notify the District Supervisor when the lessee is ready to conduct a 
preproduction test and inspection of the integrated safety system. The 
lessee shall also notify the District Supervisor upon commencement of 
production in order that a complete inspection may be conducted.
    (b) Records. The lessee shall maintain records for a period of 2 
years for each subsurface and surface safety device installed. These 
records shall be maintained by the lessee at the lessee's field office 
nearest the OCS facility or other locations conveniently available to 
the District Supervisor. These records shall be available for review by 
a representative of MMS. The records shall show the present status and 
history of each device, including dates and details of installation, 
removal, inspection, testing, repairing, adjustments, and 
reinstallation.

[53 FR 10690, Apr. 1, 1988, as amended at 55 FR 47753, Nov. 15, 1990; 62 
FR 5331, Feb. 5, 1997]



Sec. 250.125  Safety device training.

    Personnel installing, inspecting, testing, and maintaining these 
safety devices and personnel operating the production platforms shall be 
qualified in accordance with subpart O.



Sec. 250.126  Quality assurance and performance of safety and pollution prevention equipment.

    (a) Safety and pollution prevention equipment installed on the OCS 
shall meet the quality assurance requirements identified in paragraph 
(c) of this section. The MMS will consider approval of other quality 
assurance programs for the manufacture of safety and pollution 
prevention equipment. Quality assurance programs proposed

[[Page 302]]

for consideration by MMS shall be submitted to the Deputy Associate 
Director for Offshore Operations; Minerals Management Service; Mail Stop 
647; 381 Elden Street; Herndon, Virginia 22070--4817.
    (b)(1) By August 29, 1988, each lessee shall submit to the Deputy 
Associate Director for Offshore Operations a list of all certified and 
noncertified SSV's (both actuator and valve), USV's (both actuator and 
valve), and SSSV's (including safety valve locks and landing nipples) in 
the lessee's inventory as of April 1, 1988. The list shall indicate 
which items of the safety and pollution-prevention equipment were 
manufactured under American National Standards Institute/American 
Society of Mechanical Engineers Standard ANSI/ASME SPPE-1, Quality 
Assurance and Certification of Safety and Pollution-Prevention Equipment 
Used in Offshore Oil and Gas Operations and shall identify each listed 
item by manufacturer, serial number, model, the date the item entered 
inventory, and whether the item is in service on the OCS or in stock for 
installation on the OCS.
    (2) Lists received from lessees under paragraph (b)(1) of this 
section shall be maintained by MMS. An SSSV shall be removed from the 
list when it is removed from service for a failure or malfunction. A USV 
or an SSV shall be removed from the list when it is removed from service 
for remanufacture (repairs employing machining, welding, heat treating, 
or other manufacturing operations). Lessees shall notify the Deputy 
Associate Director for Offshore Operations when an SSSV is removed from 
service for a failure or malfunction or a USV or SSV is removed from 
service for remanufacture (repairs employing machining, welding, heat 
treating, or other manufacturing operations).
    (c) Safety and pollution-prevention equipment used in the OCS shall 
meet one of the following:
    (1) Be identified on the list submitted under paragraph (b) of this 
section by a lessee of the lease on which the item is to be installed,
    (2) Be certified by the manufacturer as having been produced under a 
quality assurance program that meets the requirements of ASME/ANSI SPPE-
1-1988 and addenda a, b, c, and d, or
    (3) Be certified by the manufacturer as having been produced under a 
quality assurance program that meets the requirements of API Spec Q1 and 
the technical specification API Spec 14A for SSSV's. For SSV's and USV's 
the manufacturer must meet API Spec 6A and API Spec 6AVI, or API Spec 
14D.
    (d) The installation, inspection, maintenance, testing, removal, 
redress, field repair, and documentation of safety and pollution-
prevention equipment used in the OCS shall be in accordance with API RP 
14B for an SSSV and API RP 14H for an SSV or USV. A remanufactured SSV 
or USV shall meet the requirements of paragraph (c) of this section.
    (e) Each lessee shall report the failure of safety and pollution-
prevention equipment certified in accordance with paragraph (c)(2) or 
(3) of this section.
    (1) Equipment certified under paragraph (c)(2) shall be reported in 
accordance with section OE-2670 of ASME/ANSI SPPE-1-1988 and addenda a, 
b, c, and d.
    (2) Equipment certified under paragraph (c)(3) of this section, must 
be reported in accordance with Appendix C of API Spec 14A or Appendix L 
of API Spec 6A or Appendix C of API Spec 14D, as appropriate.
    (3) Equipment certified under both paragraphs (c)(2) and (c)(3) of 
this section must be reported in accordance with both section OE-2670 of 
ASME/ANSI SPPE-1-1988 and Appendix C of API Spec 14A or Appendix L of 
API Spec 6A or Appendix C of API Spec 14D, as appropriate.
    (f) Each lessee shall report the installation of equipment certified 
in accordance with either paragraph (c)(2) or (c)(3) of this section, to 
the manufacturer of the equipment on the shipping and receiving report 
that comes with the equipment.

[53 FR 10690, Apr. 1, 1988; 53 FR 12227, Apr. 13, 1988, as amended at 54 
FR 50617, Dec. 8. 1989; 55 FR 10617, Mar. 22, 1990; 55 FR 37710, Sept. 
13, 1990; 55 FR 47753, Nov. 15, 1990; 61 FR 60025, Nov. 26, 1996]



Sec. 250.127  Hydrogen sulfide.

    Production operations in zones known to contain hydrogen sulfide

[[Page 303]]

(H2S) or in zones where the presence of H2S is 
unknown, as defined in Sec. 250.67 of this part, shall be conducted in 
accordance with that section and other relevant requirements of subpart 
H, Production Safety Systems.



                   Subpart I--Platforms and Structures



Sec. 250.130  General requirements.

    (a) The lessee shall design, fabricate, install, use, inspect, and 
maintain all platforms and structures (platforms) on the Outer 
Continental Shelf (OCS) to assure their structural integrity for the 
safe conduct of drilling, workover, and production operations, 
considering the specific environmental conditions at the platform 
location.
    (b) All new fixed or bottom-founded platforms (i.e., platforms or 
other structures, e.g., single-well caissons, artificial islands), shall 
be designed, fabricated, installed, inspected, and maintained in 
accordance with all the requirements of this section and Secs. 250.131 
and 250.134 through 250.144 of this subpart. Applications submitted 
pursuant to Sec. 250.131 shall require the approval by the Regional 
Supervisor prior to platform installation.
    (c) All new platforms which meet any of the conditions listed below 
shall be subject to the Platform Verification Program and shall be 
designed, fabricated, and installed in accordance with the requirements 
of Secs. 250.131 through 250.144 of this part.
    (1) Platforms installed in water depths exceeding 400 feet,
    (2) Platforms having natural periods in excess of 3 seconds,
    (3) Platforms installed in areas of unstable bottom conditions,
    (4) Platforms having configurations and designs which have not 
previously been used or proven for use in the area, or
    (5) Platforms installed in seismically active areas.
    (d) Major modification to any platform shall be subject to the 
requirements of this subpart and shall require the approval of the 
Regional Supervisor. Major modification means any structural changes 
which materially alter the approved plan or causes a major deviation 
from approved operations.
    (e)(1) Major repairs of damage to any platform shall require the 
prior approval of the Regional Supervisor. Major repairs of damage means 
corrective operations involving structural members affecting the 
structural integrity of a portion or all of the platform.
    (2) Under emergency conditions, repairs to primary structural 
elements may be made to restore an existing permitted condition without 
prior approval. The Regional Supervisor shall be notified within 24 
hours of the damage that occurred and repairs that were made. The 
Regional Supervisor's approval for repairs shall be obtained.
    (f) The requirements for an application for approval for the reuse 
or conversion of the use of an existing fixed or mobile platforms shall 
be determined on a case-by-case basis. An application shall be submitted 
to the Regional Supervisor for approval and shall include location, 
intended use, and demonstrate the adequacy of the design and structural 
condition of the platform.
    (g) In addition to the requirements of this subpart, platform 
design, fabrication, and installation shall conform to API RP 2A, 
Recommended Practice For Planning, Designing, And Constructing Fixed 
Offshore Platforms, or American Concrete Institute (ACI) 357R, Guide for 
the Design and Construction of Fixed Offshore Concrete Structures, as 
appropriate. Alternative codes or rules may be utilized with approval of 
the Regional Supervisor. The requirements contained in these documents 
(API RP 2A and ACI 357R) are incorporated herein insofar as they do not 
conflict with other provisions of this subpart.



Sec. 250.131  Application for approval.

    (a) All applications under the provisions of this subpart shall be 
submitted to the Regional Supervisor for approval. All significant 
changes or modifications to approved applications shall be submitted to 
the Regional Supervisor for approval.
    (b) Applications for all new platforms or major modifications shall 
be submitted in triplicate and shall contain the following information:

[[Page 304]]

    (1) General platform information including the following:
    (i) The platform designation, lease number, area name, and block 
number;
    (ii) Longitude and latitude coordinates, Universal Transverse 
Mercator grid-system coordinates, state plane coordinates in the Lambert 
or Transverse Mercator Projection system, and a plat drawn to a scale of 
1 inch = 2,000 feet showing surface location of the platform and 
distance from the nearest block lines;
    (iii) Drawings, plats, front and side elevations of the entire 
platform, and plan views that clearly illustrate essential parts, i.e., 
number and location of well slots, design loadings of each deck, water 
depth, nominal size and thickness of all primary load-bearing jacket and 
deck structural members, and nominal size, makeup, thickness, and design 
penetration of piling;
    (iv) Corrosion protection or durability details which consist of the 
corrosion-protection method; expected life; and durability criteria for 
the submerged, splash, and atmospheric zones; and
    (v) In the Alaska OCS Region, the following additional information 
shall be submitted:
    (A) Slope protection and berm elevation for manmade islands,
    (B) Wall thickness with size and placement of major steel 
reinforcement for concrete-gravity structures,
    (C) Shell thickness with size and location of major reinforcement 
members for steel-gravity structures, and
    (D) A plan for periodic inspections of the installed platforms in 
accordance with Sec. 250.142 of this part.
    (2) A summary of environmental data, as addressed in Sec. 250.134 of 
this part, which has a bearing on the platform's design, installation, 
and operation, e.g., wave heights and periods, current, vertical 
distribution of wind and gust velocities, water depth, storm and 
astronomical tide data, marine growth, snow and ice effects, and air and 
sea temperatures;
    (3) Foundation information including the following:
    (i) A geotechnical investigation report containing a brief summary 
of the major strata encountered at the location by bore holes presented 
in tabular form, a detailed subsurface profile illustrating results of 
field and laboratory testing, a listing of field and laboratory 
investigations and tests with a basic summary of resultant 
determinations, the identification of properties and conditions of the 
seabed and the subsoil, and the identification of any manmade hazards or 
obstructions;
    (ii) A description of the effect of the environmental and functional 
loads on the foundation;
    (iii) A determination, with supporting information, of the 
susceptibility of the area to soil movement and, if susceptible, an 
analysis of slope and soil stability;
    (iv) A summary of the foundation design criteria as specified in 
Sec. 250.139 of this part; and
    (v) A summary of the seafloor survey results specified in 
Sec. 250.139(b)(2) of this part.
    (4) Structural information including the following:
    (i) The design life of the platform and the basis for such 
determination.
    (ii) A summary description of the design load conditions and design 
load combinations, taking into consideration the worst environmental and 
operational conditions anticipated over the service life of the 
platform.
    (iii) A listing and description of the appropriate material 
specifications.
    (iv) A description of the design methodologies, e.g., elastic, 
inelastic, and ultimate strength, used in design of the platform.
    (v) A summary of pertinent derived factors of safety against failure 
for major structural members, e.g., unity check ratios exceeding 0.85 
for steel-jacket platform members, indicated on ``line'' sketches of 
jacket sections.
    (vi)(A) In the Alaska, Atlantic, and Pacific OCS Regions, a summary 
of the fatigue analysis as specified in Secs. 250.135 through 250.139 of 
this part. The specific requirements for a fatigue analysis shall be 
determined by the Regional Supervisor on a case-by-case basis to 
determine the adequacy of the design and to assure the structural 
integrity of the platform.
    (B) In the Gulf of Mexico OCS Region, a summary of the fatigue 
analysis as specified in Secs. 250.135 through 250.139 of this part. A 
fatigue analysis

[[Page 305]]

shall be performed for each steel template, pile-supported platform with 
natural periods greater than 3 seconds, and for each platform to be 
fabricated of high-strength steel (i.e., over 50 thousand pounds per 
square inch minimum yield) where components of high-strength steel are 
subjected to cyclic loading. The specific requirements for a fatigue 
analysis for other platforms shall be determined by the Regional 
Supervisor on a case-by-case basis to determine adequacy of the design 
and to assure the structural integrity of the platform.
    (c) The information shall be submitted with or subsequent to the 
submittal of an Exploration Plan or Development and Production Plan. 
Additional detailed data and information may be required by the Regional 
Supervisor when needed to determine the adequacy of the design.
    (d) The lessee shall have detailed structural plans as called for in 
paragraph (b)(1)(iii) of this section and specifications for new 
platforms or other structures and major modifications certified by a 
registered professional structural engineer or civil engineer 
specializing in structural design. The lessee shall also sign, date, and 
submit the following certification: Lessee certifies that the design of 
the structure/modification has been certified by a registered 
professional structural or a civil engineer specializing in structural 
design, and the structure/modification will be fabricated, installed, 
and maintained as described in the application and any approved 
modification thereto. Certified design and as built plans and 
specifications will be on file at------.
    (e) The lessee shall notify the Regional Supervisor at least 1 week 
prior to transporting the platform to the installation site.



Sec. 250.132  Platform Verification Program requirements.

    (a) Requirements. These requirements apply to the design, 
fabrication, and installation of new, fixed, bottom-founded, pile-
supported, or concrete-gravity platforms. The applicability of these 
requirements to other types of platforms shall be determined by the MMS 
on a case-by-case basis. For all new platforms or major modifications 
which meet any of the conditions contained in Sec. 250.130(c) of this 
part, the lessee shall submit the design, fabrication, and installation 
verification plans to the Regional Supervisor for approval in accordance 
with paragraph (b) of this section. The design plan shall be submitted 
with or subsequent to the submittal of an Exploration Plan or 
Development and Production Plan. The fabrication and installation plans 
shall be submitted and approval obtained before such operations are 
initiated.
    (b) Verification plan requirements. (1) General plan requirements. 
Each verification plan shall be submitted in triplicate and include the 
following:
    (i) A nomination of a Certified Verification Agent (CVA) who shall 
conduct specified reviews in accordance with Sec. 250.133 of this part,
    (ii) The CVA qualification statement consisting of the following:
    (A) Previous experience in third-party verification or experience in 
the design, fabrication, and/or installation of offshore oil and gas 
platforms, manmade islands, or other marine structures;
    (B) Technical capabilities of the individual or the primary staff to 
be associated with the CVA functions for the specific project;
    (C) Size and type of organization or corporation;
    (D) In-house availability of, or access to, appropriate technology, 
i.e., computer programs and hardware and testing materials and 
equipment;
    (E) Ability to perform the CVA functions for the specific project 
considering current commitments; and
    (F) Previous experience with MMS requirements and procedures.
    (iii) The level of work to be performed by the CVA, and
    (iv) A list of documents to be furnished to the CVA.
    (2) Design verification plan requirements. The design plan shall 
also include the following:
    (i) All design documentation specified in Sec. 250.131(b) of this 
part, and
    (ii) Abstracts of the computer programs used in the design process.
    (3) Fabrication verification plan requirements. The fabrication plan 
shall also include fabrication drawings and

[[Page 306]]

material specifications for artificial island structures, major members 
of concrete- and steel-gravity structures, all the primary load-bearing 
members included in the space-frame analysis for jacket structures, and 
a summary description of the following:
    (i) Structural tolerances,
    (ii) Welding procedures,
    (iii) Material (concrete, gravel, or silt) placement methods,
    (iv) Fabrication standards,
    (v) Material quality-control procedures,
    (vi) Methods and extent of nondestructive examinations (NDE) for 
welds and materials, and
    (vii) Quality assurance procedures.
    (4) Installation verification plan requirements. Additionally, the 
installation plan shall include a summary description of the planned 
marine operations, contingencies considered, alternate courses of 
action, and the inspections to be performed including a graphical 
identification of areas to be inspected and the acceptance/rejection 
criteria.
    (c) Requirements for resubmittal. All such plans or the appropriate 
part affected shall be resubmitted for approval if the CVA is changed, 
if the CVA's or assigned personnel's qualifications change, or if the 
level of work to be performed changes. The summary of technical details 
need not be resubmitted, unless changes are made in the technical 
details.
    (d) Combining of plans. For manmade islands or platforms fabricated 
and installed in place, the fabrication and installation verification 
plans shall be combined.



Sec. 250.133  Certified Verification Agent duties and nomination.

    (a) CVA duties. The CVA nominated by the lessee and approved by the 
Regional Supervisor shall conduct the appropriate reviews in accordance 
with the following:
    (1) Design phase. (i) The CVA shall conduct the design verification 
to ensure that the proposed platform or major modification has been 
designed to withstand the maximum environmental and functional load 
conditions anticipated during the intended service life at the proposed 
location.
    (ii) The design verification shall be conducted by, or be under the 
direct supervision of, a registered professional civil or structural 
engineer.
    (iii) The CVA shall consider the applicable provisions of 
Secs. 250.134 through 250.141 of this part and use good engineering 
practice in conducting an independent assessment of the adequacy of all 
proposed planning criteria, environmental data, load determinations, 
stress analyses, material designations, soil and foundation conditions, 
safety factors, and other pertinent parameters of the proposed design.
    (iv) Interim reports shall be submitted by the CVA, as appropriate, 
to the Regional Supervisor and the lessee.
    (v) Upon completion of the design verification, a final report shall 
be prepared which summarizes the material reviewed by the CVA and the 
findings and includes a recommendation that the Regional Supervisor 
either accept, request modification(s), or reject the proposed design. 
In addition, the report shall include the particulars of how, by whom, 
and when the independent review was conducted and any special comments 
considered necessary. The final report shall be submitted to the lessee 
and, in triplicate, to the Regional Supervisor within 6 weeks of the 
receipt of the design data or from the date the approval to act as a CVA 
was issued, whichever is later.
    (2) Fabrication verification. The CVA shall monitor the fabrication 
of the platform or major modification to ensure that it has been built 
in accordance with the approved design plans and specifications and the 
fabrication plan, including the following:
    (i) Periodic onsite inspections shall be made while fabrication is 
in progress. The following of the fabrication items, as appropriate, 
shall be verified:
    (A) Quality control by lessee and builder,
    (B) Fabrication site facilities,
    (C) Material quality and identification methods,
    (D) Fabrication procedures specified in the approved plan and 
adherence to such procedures,
    (E) Welder and welding procedure qualification and identification,

[[Page 307]]

    (F) Structural tolerances specified and adherence to those 
tolerances,
    (G) The NDE requirements and evaluation results of the specified 
examinations,
    (H) Destructive testing requirements and results,
    (I) Repair procedures,
    (J) Installation of corrosion-protection systems and splash-zone 
protection,
    (K) Erection procedures to ensure that overstressing of structural 
members does not occur,
    (L) Alignment procedures,
    (M) Dimensional check of the overall structure, and
    (N) Status of quality-control records at various stages of 
fabrication.
    (ii) The CVA shall consider the applicable provisions of 
Secs. 250.134 through 250.141 of this part and use good engineering 
practice in conducting an independent assessment of the adequacy of the 
fabrication of the platform or major modification.
    (iii) Interim reports shall be submitted by the CVA, as appropriate, 
to the Regional Supervisor and the lessee.
    (iv) If the CVA finds that fabrication procedures are changed or 
design specifications are modified, the lessee shall be informed. If the 
lessee prefers to accept the modifications as informed by the CVA, the 
Regional Supervisor shall also be informed.
    (v) A final report shall be prepared by the CVA covering the 
adequacy of the entire fabrication phase giving details of how, by whom, 
and when the independent monitoring activities were conducted and 
providing any special comments considered necessary. The final report is 
not required to cover aspects of the fabrication already included in 
interim reports. The final report shall describe the CVA's activities 
during the verification process, summarize the findings, contain a 
confirmation or denial of compliance with the design specifications and 
the approved fabrication plan, and a recommendation to accept or reject 
the fabrication. The report shall be submitted to the lessee and, in 
triplicate, to the Regional Supervisor immediately after completion of 
the fabrication of the platform.
    (3) Installation phase. The CVA shall witness the loadout of the 
jacket, deck(s), and piles from the fabrication site(s); review the 
towing records; conduct an onsite survey after transportation to the 
approved location; witness the actual installation of the platform or 
major modification; determine that the platform has been installed at 
the approved location in accordance with the approved design and the 
installation plan; and shall comply with the following:
    (i) The CVA shall consider the applicable provisions of 
Secs. 250.134 through 250.141 of this part and use good engineering 
practice in conducting an independent assessment of the adequacy of the 
installation activities. The following parts of the overall installation 
process, as appropriate, shall be verified:
    (A) Loadout and initial flotation operations, if any;
    (B) Towing operations to the specified location;
    (C) Launching and uprighting operations;
    (D) Submergence operations;
    (E) Pile installation; and
    (F) Final deck and/or component installation.
    (ii) The CVA shall observe the installation activities, spot-check 
equipment, procedures, and recordkeeping, as necessary, to determine 
compliance with Secs. 250.134 through 250.141 of this part and the 
approved plans, and immediately report to the Regional Supervisor and 
the lessee any discrepancies or damage to structural members. Approval 
for modified installation procedures or for major deviation from 
approved installation procedures shall be obtained from the Regional 
Supervisor.
    (iii) Interim reports shall be submitted by the CVA, as appropriate, 
to the Regional Supervisor and the lessee.
    (iv) A final report shall be prepared by the CVA covering the 
adequacy of the entire installation phase giving details of how, by 
whom, and when the independent monitoring activities were conducted and 
providing any special comments considered necessary. The final report 
shall describe the CVA's activities during the verification process, 
summarize the findings, contain a confirmation or denial of compliance

[[Page 308]]

with the approved installation plan, and a recommendation to accept or 
reject the installation. The report shall be submitted to the lessee 
and, in triplicate, to the Regional Supervisor within 2 weeks of 
completion of the installation of the platform.
    (4) All data provided to the CVA shall be handled in the strictest 
confidence and not be released by the CVA without the consent of the 
lessee.
    (5) Individuals or organizations acting as CVA's for a particular 
platform shall not function in any capacity other than that of a CVA for 
that specific project, whenever the additional activities would create a 
conflict, or appearance of a conflict of interest.
    (b) CVA nomination. (1) Nomination. Individuals or organizations 
shall be nominated by the lessee planning to use their services. The 
lessee shall specify whether the nomination is for the design, 
fabrication, or installation phase of verification; for two phases; or 
for all three phases.
    (2) Qualifications. Qualification submissions shall contain 
sufficient information to determine compliance with 
Sec. 250.132(b)(1)(ii) of this part.



Sec. 250.134  Environmental conditions.

    (a) General. The performance standards of this section pertain to 
all platforms covered by these requirements regardless of the 
fabrication material.
    (1) Environmental considerations. All environmental phenomena 
appropriate to the areas of fabrication, transportation, and 
installation of an offshore platform shall be considered and their 
influence on the platform accounted for. Such phenomena shall include 
wind, waves, current, temperature, tide, marine growth, chemical 
components of air and water, snow and ice, earthquakes, tsunami, seiche, 
and other appropriate phenomena.
    (2) Environmental data. Statistical data and defensible statistical 
and mathematical models shall be employed to describe the range of 
pertinent expected variations of environmental phenomena. Defensible 
data supplied by meteorologists, oceanographers, or other appropriate 
specialists are acceptable as the basis for design. Where possible, 
environmental phenomena shall be described by the characteristic 
parameters most relevant in the evaluation of effects on the platform.
    (b) Statistical methods. (1) When statistical methods are employed 
in the determination of parameters characterizing environmental 
phenomena, the statistical methods and distributions employed shall be 
appropriate to their application as evidenced by relevant statistical 
tests, confidence limits, and other measures of statistical 
significance.
    (2) Short-term and long-term variations of environmental phenomena 
such as wind, waves, and current shall be described by statistical 
distributions relevant to the parameter considered. Defensible 
statistical modeling techniques shall be used in the prediction of 
extreme values.
    (3) When hindcasting techniques are employed to approximate 
environmental parameters, the validity of the model used shall be 
defensible.
    (c) Design considerations. (1) General. A thorough assessment of the 
environment in the vicinity of the installation site shall be made to 
determine the conditions expected to occur at the site over the life of 
the platform.
    (2) Design environmental condition. (i) ``Design environmental 
condition'' means the environmental factors producing the most 
unfavorable effects on the platform. Parameters describing the design 
environmental condition are given in paragraphs (c)(2)(ii) (A), (B), and 
(C) of this section.
    (ii) The design environmental condition shall reflect the various 
environmental events that individually or collectively represent the 
most severe conditions the platform is anticipated to experience. Such 
conditions shall be formulated with a set of parameters that describe 
the relevant environmental events, including the following:
    (A) The maximum wave corresponding to a selected recurrence period 
together with the associated wind, current, and appropriate ice and snow 
effects;
    (B) The minimum air and sea temperatures appropriate to the event 
being treated; and
    (C) The maximum water level due to tide and storm surge.

[[Page 309]]

    (iii) Consideration shall be given to other combinations of the 
parameters specified in paragraph (c)(2)(ii)(A) of this section 
involving either maximum wind, maximum current, or maximum ice load 
which may cause a greater response of the platform.
    (iv) In general, the recurrence period chosen for the events 
specified in paragraphs (c)(2)(ii) (A) and (C) of this section shall 
primarily be based on the design service life of the platform. For 
platforms designed for a service life of 20 years, the recurrence period 
chosen for the determination of these events shall not be less than 100 
years. For other service lives, the design event recurrence interval 
shall generally be adjusted to provide for a risk of occurrence which 
does not exceed the risk of occurrence for the 20-year/100-year 
combination.
    (v) For installation sites located in seismically active areas, see 
paragraph (d)(8) of this section.
    (3) Operating environmental conditions. Operating environmental 
conditions means the set of characteristic parameters of environmental 
conditions associated with a normal function or operation to be 
conducted on the platform. For each such intended normal function or 
operation, the lessee shall determine a set of characteristic parameters 
of environmental conditions.
    (d) Specific environmental conditions. (1) Waves information 
including the following:
    (i) Wave conditions considered for design shall be described by 
defensible statistical and/or deterministic methods.
    (ii) Parameters characterizing design environmental waves shall be 
based on wave statistics or the results of defensible analytic 
prediction methods such as hindcasting techniques.
    (iii) When using probabilistic analyses, the probability of 
occurrence of various wave-height groups classified by directionality 
and for a wide range of possible periods (i.e., tables of exceedance) 
shall be determined. Where required by the method selected to predict 
extreme values, the average duration of various wave-height groups 
(i.e., persistence data) shall be determined. All extrapolations and 
long-term wave data analyses shall use defensible techniques, and 
available data on extreme values measured in the vicinity of the site 
shall be included in the long-term prediction.
    (iv) When using deterministic methods, waves shall be described by 
the parameters, height, period, and other relevant shape 
characteristics. The design-wave formulation used shall be valid for the 
problem considered.
    (v) Breaking-wave criteria appropriate to the installation site 
shall be determined using defensible formulations.
    (vi) If spectral wave data are established for the dynamic analysis 
of structural response to waves, such data shall be derived in 
accordance with defensible methods. If spectral data are not available 
in adequate quantities for the intended application, defensible 
mathematical formulations that best fit the available data shall be 
used.
    (2) Wind information including the following:
    (i) Wind velocities shall be classified on the basis of their 
duration. Wind velocities having a duration of less than 1 minute are 
referred to as gust winds. Wind velocities having a duration equal to or 
greater than 1 minute are referred to as sustained winds. The reference 
elevation is 33 feet above still-water level.
    (ii) Wind conditions considered for design shall be described by 
defensible statistical or deterministic methods.
    (iii) Wind profiles shall be determined on the basis of defensible 
statistical or mathematical models. Corrections of wind velocity data to 
averaging periods other than those employed in the collections of data 
shall be based on defensible methods.
    (iv) Distribution of the direction and speed of wind approach to the 
platform shall be determined, or alternatively, winds shall be 
considered to approach from any direction.
    (3) Current information including the following:
    (i) Current velocities to be used in design shall be determined on 
the basis of the best statistics available. Tidal current, wind-
generated current, density current, circulation current, and river-
outflow current shall be combined on

[[Page 310]]

the basis of their probability of simultaneous occurrence in arriving at 
current velocities to be used in design.
    (ii) Current velocity profiles shall be determined on the basis of 
site-specific studies or defensible empirical relationships. Unusual 
profiles due to bottom currents and stratified effects in regions near 
the mouth of large rivers shall be accounted for.
    (iii) Directional data on currents which exist in the absence of 
waves shall be described for each month or by season. Unless a detailed 
study of current directions is made, currents shall be assumed to run in 
any direction.
    (4) Tide information including the following:
    (i) The design storm-tide elevation shall be identified for the 
installation site. For design purposes, the design environmental wave 
height shall be superimposed on the storm-tide elevation.
    (ii) Variations in the elevation of the daily lunar tide shall be 
used in determining the elevations of boat landings, barge fenders, and 
the corrosion-prevention treatment of platforms in the splash zone (see 
Sec. 250.136(c)(5) of this part).
    (iii) The assumed maximum or storm tide shall include astronomical 
tide, wind tide, and pressure-induced storm surge. Minimum-tide 
estimates shall be based on either the astronomical or lunar tide only. 
The water depth shall be referenced to a datum (e.g., mean low/water or 
mean low low/water) consistent with all other references to elevations 
and depths.
    (iv) If data directly applicable to the installation site are not 
available, the best estimate based on data for nearby locations shall be 
used.
    (5) Temperature information including the following:
    (i) Extreme values of low temperatures shall be expressed in terms 
of the most probable, lowest values with their corresponding recurrence 
periods;
    (ii) Air, sea surface, and seabed temperatures shall be accounted 
for in describing the environment and in justifying the temperatures 
used in design.
    (6) Snow and ice information including the following:
    (i) If the platform is to be located in an area where sea ice may 
develop or drift, ice conditions shall be accounted for. Data shall be 
derived from actual field investigations, laboratory analyses, or other 
appropriate analogous sources;
    (ii)(A) Relevant statistical and physical data on the sea-ice and 
snow conditions shall be described with particular attention to the 
following:
    (1) Concentration and distribution of ice and snow,
    (2) Morphology of sea ice (e.g., ice floes, ice ridges, or rafted 
ice),
    (3) Mechanical properties of ice (mode of failure),
    (4) Drift speed and direction,
    (5) Thickness of ice and keel depth of pressure ridges, and
    (6) Probability of encountering icebergs, ice floes, ice-floe 
fragments, and hummocks.
    (B) The weight of the maximum snow and ice anticipated to accumulate 
on the platform shall be determined.
    (7) Marine growth information including the following:
    (i) When assessing the potential for marine growth, account shall be 
taken of relevant observations and experience in the area. In the 
absence of such information, defensible analytical techniques shall be 
employed to assess the potential for marine growth. These techniques 
shall take into account salinity, oxygen content, hydrogen-ion 
concentration value, current, temperature, water turbidity, and other 
appropriate factors.
    (ii) Consideration shall be given to the selection of surface 
coatings which resist breakdown by micro-organisms which reduce the 
onset of corrosion.
    (iii) Particular attention shall be paid to the effects that marine 
growth has on surface roughness characteristics of submerged structural 
members.
    (8) Earthquake information including the following:
    (i) The effects of earthquakes on platforms located in areas known 
to be seismically active shall be addressed.
    (ii) Except for the provision of Sec. 250.135(d)(5)(ii) of this 
part, the seismicity of the site shall be determined. Preferably, this 
shall be based on site-specific data. However, regional data shall be 
deemed acceptable for use

[[Page 311]]

when site-specific data are not available and the regional data are 
interpreted in a manner to produce the most adverse effect on a platform 
at the specific site. The following data shall be obtained:
    (A) Recurrence interval of seismic events appropriate to the design 
life of the structure,
    (B) Proximity to active faults,
    (C) Type of faulting,
    (D) Attenuation of ground motion between the faults and the site,
    (E) Subsurface soil conditions, and
    (F) Records from past seismic events at the site or from analogous 
sites.
    (iii) The use of available data to describe the seismic 
characteristics of the site is permitted where it can be shown that such 
data are consistent with the requirements of paragraph (d)(8)(ii) of 
this section.
    (iv) The seismic data shall be used to establish a quantitative 
design earthquake criterion describing the design earthquake-induced 
ground motion. In addition to ground motion and as applicable to the 
installation site, the following earthquake-related phenomena shall be 
taken into account:
    (A) Liquefaction of subsurface soils,
    (B) Submarine slides,
    (C) Tsunamis, and
    (D) Fluid motions in tanks.

[53 FR 10690, Apr. 1, 1988; 53 FR 26067, July 11, 1988]



Sec. 250.135  Loads.

    (a) Introduction. This section covers the identification, 
definition, and determination of the loads to which a fixed offshore 
platform may be exposed during and after its transportation and 
installation. The requirements contained in paragraphs (b) through (d) 
of this section apply to both steel-piled platforms and concrete-gravity 
platforms. Additional requirements covering steel-piled platforms are 
contained in paragraph (e) of this section. Additional requirements 
covering concrete-gravity platforms are contained in paragraph (f) of 
this section.
    (b) General. (1) All types of loads specified in paragraphs (c)(1) 
through (c)(5) of this section shall be accounted for in the design and 
operation of the platform.
    (2) Where applicable, the effects of increased dimensions and weight 
due to marine growth and snow and ice accumulation shall be addressed in 
the design.
    (c) Load definition. (1) Dead loads. Dead loads associated with the 
platform are loads that do not change during the mode of operation under 
consideration. Dead loads include the following:
    (i) Weight in the air of the platform (refer to paragraphs (e)(1) 
and (f)(1) of this section for itemizations of weight for pilefounded 
platforms and gravity platforms, respectively).
    (ii) Weight of permanent ballast and the weight of permanent 
machinery including liquids at operating levels.
    (iii) External hydrostatic pressure and buoyancy in calm sea 
conditions calculated on the basis of the design waterline.
    (iv) Static earth pressure.
    (2) Live loads. Live loads associated with the normal operation and 
use of the platform are loads that could change during the mode of 
operation considered. Live loads acting after fabrication or 
installation include the following:
    (i) Weight of drilling and production equipment that can be removed 
such as derrick, draw works, mud pumps, mud tanks, separators, and 
tanks.
    (ii) Weight of crew and consumable supplies such as mud, chemicals, 
water, fuel, pipe, cable, stores, drill stem, and casing.
    (iii) Weight of liquids in storage tanks.
    (iv) Forces exerted on the platform due to drilling, e.g., the 
maximum derrick reaction when placing or pulling casing.
    (v) The forces exerted on the platform during the operation of 
cranes and vehicles.
    (vi) The forces exerted on the platform by vessels moored to the 
platform.
    (vii) The forces exerted on the platform by helicopters during 
takeoff and landing or while parked on the platform. When applicable, 
the dynamic effects on the platform of the forces specified in 
paragraphs (c)(2) (iv) through (vii) of this section shall be taken into 
account. Live loads occurring during

[[Page 312]]

transportation and installation shall be determined for each specific 
operation involved, and the dynamic effects of such loads shall be 
addressed (see Sec. 250.140 of this part).
    (3) Deformation loads. Deformation loads are loads due to 
deformations imposed on the platform. For an itemization of deformation 
loads applicable to steel-piled platforms and concretegravity platforms, 
see paragraphs (e)(2) and (f)(2) of this section, respectively.
    (4) Accidental loads. Consideration shall be given to accidental 
loadings; and where such loadings are determined to be a factor, they 
shall be quantified and incorporated into the design. Accidental loads 
are loads that could occur as the result of an accident or exceptional 
conditions, such as the following:
    (i) Extreme impact loads caused by supply boats, barges, and other 
craft anticipated to work in the vicinity of the platform;
    (ii) Impact loads caused by dropped objects, such as drill collars, 
casing, blowout-preventer stacks;
    (iii) Loss of internal pressure required to resist hydrostatic 
loading and to maintain buoyancy during the installation of the 
platform;
    (iv) Explosion;
    (v) Effects of fire; and
    (vi) Iceberg collision.
    (5) Environmental load information including the following:
    (i) Environmental loads are loads due to wind, waves, current, ice, 
snow, earthquake, and other environmental phenomena.
    (ii) The characteristic parameters defining an environmental load 
shall be appropriate to the installation site as determined by the 
studies required by Sec. 250.134 of this part. Operating environmental 
loads are loads derived from the parameters characterizing operating 
environmental conditions (see Sec. 250.134(c)(3) of this part). Design 
environmental loads are loads derived from the parameters characterizing 
the design environmental condition (see Sec. 250.134(c)(2) of this 
part).
    (iii) Environmental loads shall be applied to the platform from 
directions producing the most unfavorable effects on the platform unless 
site-specific studies allow for a less stringent requirement.
    (iv) The combination and severity of design environmental loads 
shall be consistent with the likelihood of their simultaneous 
occurrence. The simultaneous occurrence of environmental loads shall be 
modeled by appropriate superposition methods.
    (v) Earthquake loads and loads resulting from accidental or rare 
environmental phenomena need not be combined with other environmental 
loads unless site-specific conditions indicate that such combination is 
appropriate.
    (d) Determination of environmental loads. (1) Wave load information 
including the following:
    (i) Wave-induced loads shall be calculated using defensible methods 
or shall be obtained from adequate model or field test data;
    (ii) A sufficient range of waves and wavecrest positions relative to 
the platform shall be investigated to ensure an accurate determination 
of the maximum wave load on the platform;
    (iii) Wave impact loads on structural members below the design wave 
crest elevation shall be accounted for by defensible theoretical methods 
or relevant model test of full-scale data;
    (iv) Where applicable, the possibility of dynamic excitation of the 
platform due to flow-induced cyclic loading shall be addressed;
    (v) For additional requirements pertaining to steel-piled platforms 
and concrete gravity-platforms, see paragraphs (e)(3) and (f)(3) of this 
section, respectively; and
    (vi) Where applicable, additional hydrostatic loading effects shall 
be addressed.
    (2) Wind load information including the following:
    (i) Wind loads, local wind pressures, and wind profiles shall be 
determined on the basis of defensible analytical methods or wind tunnel 
tests on a representative model of the platform,
    (ii) In determining design environmental loads on the overall 
platform, wind loads calculated on the basis of the design-sustained 
wind velocity shall be combined with other design environmental loads,

[[Page 313]]

    (iii) The design gust wind load shall be used in the design of local 
structure unless the effects of the load combination described in 
paragraph (d)(2)(ii) of this section are more severe,
    (iv) Where appropriate, the dynamic effects due to the cyclic nature 
of gust wind and cyclic loads due to vortex shedding shall be taken into 
account. Both the drag and lift components of loads due to vortex 
shedding shall be taken into account.
    (v) Where appropriate, flutter and load amplification due to vortex 
shedding shall be addressed.
    (3) Current load information including the following:
    (i) Current-induced loads on immersed members of the platform shall 
be accounted for by defensible methods or the results of model test or 
site-specific data,
    (ii) The lift and drag coefficients used in the determination of 
current loads shall be appropriate to the current velocity and 
structural configuration,
    (iii) Current velocity profiles used in design shall be appropriate 
to the installation site,
    (iv) For determination of loads induced by the simultaneous 
occurrence of wave and current fields, the total velocity field shall be 
computed by defensible methods before computing the total force, and
    (v) Where appropriate, flutter and load amplification due to vortex 
shedding shall be addressed.
    (4) Ice and snow load information including the following:
    (i) For platforms located in areas associated with ice movement, 
contact loads caused by floating ice shall be determined according to 
defensible theoretical methods, model test data, or full-scale 
measurements;
    (ii) In locations where platforms are subject to ice and snow 
accumulation, the additional weight of snow and ice on the platform 
shall be addressed;
    (iii) The effects of ice accumulation and ice jam, including the 
effects of changes in configuration due to adhesion, shall be accounted 
for in the determination of the total environmental load; and
    (iv) The incident pressure due to pack ice, pressure ridges, and 
where appropriate, ice island fragments impinging on the platform shall 
be addressed.
    (5) Earthquake load information including the following:
    (i) For platforms located in seismically active areas, design 
earthquake-induced ground motions shall be determined on the basis of 
seismic data applicable to the installation site. Design earthquake 
ground motions shall be described by either applicable ground motion 
records or response spectra consistent with the recurrence period 
appropriate to the design life of the platform.
    (ii) Available and defensible standardized spectra applicable to the 
region of the installation site are acceptable if such spectra reflect 
those site-specific conditions affecting frequency content and energy 
distribution. These conditions include the type of active faults in the 
region, the proximity of the site to the potential source faults, the 
attenuation or amplification of ground motion between the faults and the 
site, and the soil conditions at the site.
    (iii) Ground-motion descriptions shall consist of three components 
corresponding to two orthogonal horizontal directions and the vertical 
direction. All three components shall be applied to the platform 
simultaneously.
    (iv)(A) When the response spectrum method is used for structural 
analysis, input values of ground motion (spectral acceleration 
representation) shall not be less severe than the following:
    (1) One hundred percent in a principal horizontal direction,
    (2) Sixty-seven percent in the orthogonal horizontal direction, and
    (3) Fifty percent in the vertical direction.
    (B) The horizontal components shall also be applied in the 
alternative orthogonal horizontal directions.
    (v) If the time history method is used for structural analysis, at 
least three sets of ground-motion time histories shall be employed. The 
manner in which the time histories are used shall account for the 
potential sensitivity of the platform's response to variations in the 
phasing of the ground-motion records.

[[Page 314]]

    (vi) When applicable, effects of soil liquefaction and/or loads 
resulting from submarine slides or creep, tsunamis, and earthquake 
motions shall be addressed.
    (e) Loads on steel pile-supported platforms. The following 
requirements apply to loads on steel pile-supported platforms and shall 
be applied together with the requirements in paragraphs (b), (c), and 
(d) of this section:
    (1) The dead load of the platform shall include, as appropriate, the 
weight in air of the jacket, piling, grout, superstructure modules, 
stiffeners, decking, piping, heliport, and any other fixed structural 
part less buoyancy, with due allowance for flooding.
    (2) Where appropriate, the deformation loads to be accounted for are 
those resulting from temperature variations leading to thermal stresses 
in the platform, and those resulting from soil displacements (e.g., 
differential settlements or lateral displacements).
    (3) Wave load information including the following:
    (i) For platforms composed of members having diameters that are 
negligible in relation to the wave lengths considered, semiempirical 
formulations accounting for wave-induced drag and inertia forces based 
on the water particle velocities and accelerations on an undisturbed, 
incident flow field are acceptable;
    (ii) When a method as described in paragraph (e)(3)(i) of this 
section is used, the wave field shall be described by a defensible wave 
theory appropriate to the wave heights, wave periods, and water depth at 
the installation site;
    (iii) The coefficients of drag and inertia used in calculating wave 
loads shall be determined on the basis of model test results, published 
data, or full-scale measurements appropriate to the structural 
configuration, surface roughness, and wave field; and
    (iv) For platforms composed of members whose diameters are not 
negligible in relation to the wave lengths considered and for structural 
configurations that will substantially alter the undisturbed, incident 
flow field, diffraction forces and the hydrodynamic interaction of 
structural members shall be taken into account.
    (f) Loads on concrete-gravity platforms. The following requirements 
apply to loads on concrete-gravity platforms and shall be applied 
together with the requirements described in paragraphs (b), (c), and (d) 
of this section.
    (1) The dead load of the platform shall include, as appropriate, the 
weight in air of the foundation, skirts, columns, superstructure 
modules, decking, piping, heliport, and any other fixed structural part 
less buoyancy with due allowance for flooding. Weight calculations based 
on nominal dimensions and mean values of density are acceptable.
    (2) The deformation loads to be accounted for are those due to 
prestress, shrinkage and expansion, creep, temperature variations, and 
differential settlements.
    (3) Wave load information including the following:
    (i) For platforms composed of large gravity bases and one or more 
columns whose diameters are not negligible in relation to the wave 
lengths considered, defensible wave-load theories which account for the 
drag, inertia, and diffraction forces on the platform shall be employed;
    (ii) For complex structural configurations, the hydrodynamic 
interaction of large, immersed structural members shall be addressed;
    (iii) When diffraction forces and hydrodynamic interaction are 
negligible, only semiempirical formulations comparable to those 
mentioned in paragraphs (e)(3) (i) and (iii) of this section accounting 
for drag and inertia forces are acceptable; and
    (iv) The undisturbed, incident flow field shall be addressed by a 
defensible wave theory appropriate to the wave heights, wave periods, 
and water depth at the installation site.

[53 FR 10690, Apr. 1, 1988; 53 FR 26067, July 11, 1988]



Sec. 250.136  General design requirements.

    (a) General. This section specifies the general concepts and methods 
of analysis to be incorporated in the design of a platform.
    (b) Analytical approaches. (1) Structural response information 
including the following:

[[Page 315]]

    (i) Methods of analysis employed in association with the 
specifications of these requirements shall treat geometric and material 
nonlinearities in a defensible manner. When nonlinear methods of 
analysis are used to assess collapse mechanisms, it shall be 
demonstrated that the platform has sufficient ductility to develop the 
required resistance or structural displacements.
    (ii) Where theoretically based analytical procedures covering the 
platform or parts thereof are unavailable or not well defined, model 
studies shall be utilized. The acceptability of model studies depends on 
the procedures employed, including enumeration of the possible sources 
of errors, the limits of applicability of the model test results, and 
the methods of extrapolation to full-scale data.
    (2) Loading format information including the following:
    (i) Either a deterministic or spectral format shall be employed to 
describe various load components. When a static approach is used, it 
shall be demonstrated, where appropriate, that the general effects of 
dynamic amplification were addressed. The influence of waves other than 
the highest waves shall be investigated for their potential to produce 
maximum peak stresses resulting from possible resonance with the 
platform.
    (ii) When considering the design earthquake as discussed in 
Sec. 250.135 of this part, a dynamic analysis shall be performed. A 
dynamic analysis shall also be performed to assess the effects of 
environmental or other types of loads if significant dynamic 
amplification is expected.
    (iii) For fatigue analysis, the long-term distribution of the stress 
range, with proper consideration of dynamic effects, shall be obtained 
for relevant loadings anticipated during the design life of the platform 
(see Secs. 250.137(c)(6) and 250.138(c)(6) of this part).
    (3) Combinations of loading components information including the 
following:
    (i) Loads imposed during and after installation shall be taken into 
account. Of the various loads described in Sec. 250.135, of this part, 
those loads to be considered for design shall be combined in a manner 
consistent with their probability of simultaneous occurrence. However, 
earthquake loadings shall be applied without consideration of other 
environmental effects unless conditions at the site necessitate their 
inclusion. The direction of applied environmental loads shall be that 
producing the highest possible influences on the platform, considering 
the platform's orientation and location with respect to bottom 
topography, direction of fetch, and nearby land masses.
    (ii) While it is required to obtain and use those loading components 
which produce realistic maximum effects on the platform, loading 
combinations corresponding to conditions after installation shall 
reflect both operating and design environmental loadings. Sections 
250.137, 250.138, and 250.139 of this part give the minimum load 
combinations to be considered.
    (iii) The operating environmental conditions and the maximum 
tolerable environmental loads during installation shall be specified.
    (c) Overall design considerations. (1) Design life. The design 
service life of the platform shall be specified as prescribed in 
Sec. 250.134(c)(2)(iv) of this part.
    (2) Air gap. An air gap of 5 feet shall be provided between the 
maximum crest elevation of the design wave (including tidal effects) and 
the lowest portion of the platform upon which wave forces have not been 
included in the design. After accounting for the initial and long-term 
settlements resulting from consolidation and subsidence, the elevation 
of the crest of the design wave shall be based on the elevation of the 
mean low-water line, astronomical and storm tides, wave runup, the 
tilting of the platform, and where necessary, tsunamis.
    (3) Long-term and secondary effects. The following effects shall be 
addressed, as appropriate, for the planned platform:
    (i) Local vibration due to machinery, equipment, and vortex 
shedding;
    (ii) Stress concentrations at critical joints;
    (iii) Secondary stresses induced by large deflections (P- 
effects);
    (iv) Cumulative fatigue;
    (v) Corrosion;
    (vi) Marine growth; and
    (vii) Ice abrasion.

[[Page 316]]

    (4) General arrangement. The platform and equipment shall be 
arranged to minimize the potential of structural damage and personal 
injury resulting from accidents. In this regard, the consequences of the 
arrangement or placement of the following components and their effects 
shall be addressed:
    (i) Equipment and machinery--noise and vibration,
    (ii) High-pressure piping--leakage in closed spaces,
    (iii) Lifting devices--dropped loads, and
    (iv) Vessel mooring devices--line breakage and tripping quick-
release mechanisms.
    (5) Corrosion-protection zones. Measures taken to mitigate the 
effects of corrosion as required by Secs. 250.137(d) and 250.138(c)(5) 
of this part shall be specified and described in terms of the following 
definitions for corrosion-protection zones:
    (i) Submerged zone--that part of the platform below the splash zone,
    (ii) Splash zone--that part of the platform between the highest and 
lowest water levels reached by sea states exceeded for 1 percent of the 
time annually when superimposed on the highest and lowest levels of tide 
with due allowance for high and low installation of the platform,
    (iii) Atmospheric zone--that part of the platform above the splash 
zone,
    (iv) Ice zone--that part of the platform which can reasonably be 
expected to come into contact with floating or submerged ice annually.

[53 FR 10690, Apr. 1, 1988; 53 FR 26067, July 11, 1988]



Sec. 250.137  Steel platforms.

    (a) Materials--(1) General. (i) This section covers specifications 
for materials used for the construction of steel pile-supported 
platforms. Steels shall be suitable for their intended service as 
demonstrated by testing under relevant service conditions or previous 
satisfactory performance under service conditions similar to those 
intended. Steels shall be of good commercial quality, defined by 
specification, and free of injurious defects.
    (ii) Steels shall exhibit satisfactory formability and weldability 
characteristics and fracture toughness satisfactory for the intended 
applications. Materials for structural members which are fracture 
critical or for members which sustain significant tensile stress and 
whose fracture would pose a threat to the survival of the platform shall 
have sufficient toughness to guard against brittle fracture. Materials 
selected for members which are subjected to significant tensile stress 
shall have toughness suitable to their intended application.
     (iii) In cases where principal loads from either service or weld 
residual stresses are imposed normal to the plate, appropriate 
precautions shall be taken to avoid lamellar tearing parallel to the 
plate surface.
    (2) Material selection information including the following:
    (i) Steels for structural members shall be selected according to 
criteria that take into account the required yield strength, fracture 
toughness, service temperature (see paragraph (a)(3) of this section), 
and intended application;
    (ii) Bolts and nuts shall have mechanical and corrosion properties 
comparable to the structural elements being joined. Materials for bolts 
and nuts shall be defined by and tested in accordance with material 
standards compatible with those for the joined structural members;
    (iii) When new alloys are used, the adequacy of fracture toughness 
shall be supported by appropriate fracture tests; and
    (iv) When materials other than steel are used for structural 
purposes, the mechanical and durability properties necessary for their 
intended function shall be designated, including toughness and fatigue 
characteristics, where necessary.
    (3) Service temperature. Service temperature means the temperature 
that the material is expected to achieve in the operational environment.
    (i) For material at or below the waterline, the minimum service 
temperature shall be the lowest average daily water temperature 
applicable to the particular depth. For material above the waterline, 
the minimum service temperature shall be the lowest 1-day average daily 
atmospheric temperature

[[Page 317]]

over a 10-year period, unless the material is warmed by auxiliary 
heating.
    (ii) In all cases where material temperature is reduced by localized 
cryogenic storage or other cooling means, such factors shall be 
accounted for in establishing minimum service temperature.
    (4) Classification of applications. When considering the welding 
requirements given in subsequent sections, materials shall be considered 
as ``Weld Class A'' if the members are critical or special structural 
elements, ``Weld Class B'' if the members are primary load-carrying 
members of the platform, or ``Weld Class C'' if the members are 
secondary structural elements.
    (5) Material designation. All material employed in platform 
construction shall be described and designated by a material 
specification.
    (b) Fabrication and welding--(1) General. (i) Welding shall be 
performed in accordance with the applicable provisions of the American 
Welding Society (AWS) publication, AWS D1.1, Structural Welding Code--
Steel, or other appropriate welding codes.
    (ii) Fabrication other than welding shall be performed in accordance 
with American Institute of Steel Construction (AISC) publication, 
Specification for Structural Steel Buildings, Allowable Stress Design 
and Plastic Design, or other appropriate codes. The code to be followed 
during fabrication and construction shall be specified on design 
documents.
    (2) Welding. (i) Welding procedures and filler metals shall be 
selected to produce sound welds, and the filler metal shall have 
strength and toughness compatible with the base metal. Workmanship shall 
be in compliance with paragraph (b)(1)(i) of this section.
    (ii) Forming processes shall not degrade the base metals below their 
minimum required properties. A heat treatment shall be employed to 
provide the required properties, where necessary.
    (iii) Misalignment between parallel (abutting) members shall be 
minimized. Weld size for fillet welds shall be sufficient to compensate 
for the gap between faying surfaces of the members. Lapped joints shall 
possess sufficient overlaps. Both edges of an overlap joint shall have 
continuous fillet welds.
    (iv) When arc-air gouging is employed, the carbon buildup and 
burning of the weld or base metals shall be minimized.
    (v) Peening shall not be used for single-pass welds or for the root 
or cover passes of multipass welds. Peening shall be used only after 
cleaning of weld passes. Fairing by heating, flame shrinking, or other 
methods, when applied to Weld Class A or B structural elements, shall be 
performed without damaging the base metals. Such corrective measures 
shall be kept to a minimum when treating high-strength steels.
    (3) Quality assurance. A documented inspection plan shall be 
prepared and followed and shall cover the following items:
    (i) A suitable system for material identification and quality 
control during all stages of construction,
    (ii) Requirements for welding procedures and welder qualifications,
    (iii) The extent of weld inspection (including nondestructive 
examination methods) and the criteria for weld acceptance or rejection, 
and
    (iv) Necessary dimensional tolerances.
    (4) Weld nondestructive examination. (i) All welds shall be 
subjected to visual examination. Nondestructive examination shall be 
conducted to the extent indicated in paragraph (b)(4)(ii) of this 
section after all forming and postweld heat treatments have been 
completed. Weld examination procedures shall be adequate to detect 
delayed weld cracking in cases involving high-strength steels or high-
hydrogen welding processes.
    (ii) As called for in paragraph (b)(3)(iii) of this section, a plan 
for nondestructive examination of the welds shall be prepared and 
followed. The extent of inspection of Weld Classes A and B structural 
elements shall be consistent with the applications involved. Important 
welds of Weld Classes A and B structural elements are those inaccessible 
or very difficult to inspect in service. Important welds shall be 
subjected to an increased level of nondestructive examination during 
fabrication.

[[Page 318]]

    (iii) If the proportion of unacceptable welds becomes excessive, the 
frequency of nondestructive examination shall be increased.
    (c) Design and analysis--(1) General. (i) Steel platforms shall be 
adequately designed and analyzed to withstand the loads to which they 
are likely to be exposed during their design life. The effects on the 
platform shall be determined for a minimum set of loading conditions by 
using a defensible method to ensure that the resulting responses do not 
exceed the safety criteria appropriate to the methods employed.
    (ii) The use of design methods, other than those specifically 
covered in this section, and their associated safety criteria are 
allowed if it can be demonstrated that such alternative methods will 
result in a structural safety level equivalent to that provided by the 
direct application of these requirements.
    (iii) Sections 250.135 and 250.136 of this part shall be consulted 
regarding definitions and requirements pertinent to the determination of 
loads and general design requirements.
    (2) Loading conditions. (i) Appropriate loading conditions that 
produce the most adverse effects on the platform during and after 
fabrication and installation shall be considered;
    (ii) Loadings corresponding to conditions after installation shall 
include at least those relating to both the operating and design 
environmental conditions, combined with other pertinent loads in the 
following manner:
    (A) Operating environmental conditions combined with dead and live 
loads appropriate to the function and operation of the platform;
    (B) Design environmental conditions combined with dead and live 
loads appropriate to the function and operation of the platform;
    (C) Design environmental conditions combined with dead loads and 
minimum live loads appropriate to the function and operation of the 
platform; and
    (iii) For platforms located in seismically active areas, loads 
induced by earthquake ground motions shall be combined with dead and 
live loads appropriate to the operation and function of the platform.
    (3) Methods of design and analysis. (i) The nature of loads and 
loading combinations as well as the local environmental conditions shall 
be considered in the selection of design methods. Methods of analysis 
and their associated assumptions shall be compatible with the overall 
design principles.
    (ii) Linear, elastic methods (working stress methods) of design and 
analysis are acceptable if proper measures are taken to prevent general 
and local buckling failure. Regarding structural instability as a 
possible mode of failure, the effects of initial stresses and geometric 
imperfection shall be taken into account.
    (iii) Dynamic effects shall be accounted for if the wave energy in 
the frequency range of the structural resonance frequencies is of 
sufficient magnitude to produce significant stresses in the platform. 
The determination of dynamic effects shall be accomplished either by 
computing the dynamic amplification effects in conjunction with a 
deterministic analysis or by a random dynamic analysis based on a 
spectral formulation. In the latter case, the analysis shall be 
accompanied by a statistical description and evaluation of the relevant 
input parameters.
    (iv) The interaction of the soil with the platform's piles shall be 
included in the analytical model used to obtain the structural response 
(see Sec. 250.139(d)(1)(ii) of this part).
    (v) For static loads, plastic methods of design and analysis shall 
be employed only when the properties of the steel and the connections 
exclude the possibility of brittle fracture and allow for formation of 
plastic hinges with sufficient plastic rotation capacity and adequate 
fatigue resistance.
    (vi) Whenever plastic analysis is used, it shall be demonstrated 
that the collapse mode (mechanism) corresponding to the smallest loading 
intensities has been used for the determination of the ultimate strength 
of the platform. The effect of buckling and other destabilizing 
nonlinear effects shall be taken into account in the plastic analysis of 
platforms with compressive forces. Whenever nonmonotonic or repeating 
loads are present, it shall be

[[Page 319]]

demonstrated that the structure will not fail by incremental collapse or 
fatigue.
    (vii) Under dynamic loads when plastic strains may occur, the 
considerations specified in paragraph (c)(3)(v) of this section shall be 
satisfied and any buckling and destabilizing nonlinear effects shall be 
taken into account.
    (4) Allowable stresses and load factors. (i) When the design is 
based on a working-stress method (see paragraphs (c)(1)(ii) and 
(c)(3)(ii) of this section), the safety criteria shall be expressed in 
terms of appropriate basic allowable stresses in accordance with 
requirements specified in paragraphs (c)(4) (ii) through (vi) of this 
section.
    (ii) For structural members and loadings covered by AISC 
publication, Specification for Structural Steel Buildings, Allowable 
Stress Design and Plastic Design, with the exception of earthquake 
loadings (see paragraph (c)(4)(v) of this section) and tubular 
structural members under the combined loading of axial compression and 
bending, the basic allowable stresses of the members shall be obtained 
using the AISC specification. For tubular members subjected to the 
aforementioned interaction, stress limits shall be set in accordance 
with a defensible formulation.
    (iii) Where stresses in members listed in paragraph (c)(4)(ii) of 
this section are shown to result from forces imposed by the design 
environmental conditions acting alone or in combination with dead and 
live loads (see paragraph (c)(2)(ii) of this section), the basic 
allowable stresses cited in paragraph (c)(4)(ii) of this section, 
modified by a factor of four-thirds, are permitted for the design 
environmental load contribution if the resulting structural member sizes 
are not less than those required for dead and live loads plus operating 
environmental conditions without the one-third increase in allowable 
stresses.
    (iv) For any two- or three-dimensional stress fields within the 
scope of the working-stress formulation, the equivalent stress (e.g., 
the von Mises stress intensity) shall be limited by an appropriate 
allowable stress less than the yield stress, with the exception of 
stresses of a highly localized nature. In the latter case, local 
yielding of the structure is acceptable if it can be demonstrated that 
such yielding does not lead to progressive collapse of the overall 
platform and that the general structural stability can be maintained.
    (v) When considering loading combinations on individual members or 
on the overall platform, which include loads defined as accidental (see 
Sec. 250.135(c)(4) of this part), or in pursuing structural analysis for 
earthquake loads (see paragraph (c)(2)(iii) of this section), the 
allowable stress set at a level of the minimum yield or buckling 
strength of the material shall be considered appropriate.
    (vi) Whenever elastic instability, overall or local, may occur 
before the compressive stresses reach the minimum specified yield 
strength of the material, appropriate allowable buckling stresses shall 
govern.
    (vii) Whenever the ultimate strength of the platform is used as the 
basis for the design of its members, the safety factors or the factored 
loads shall be formulated in accordance with the requirements of AISC 
publication, Specification for Structural Steel Buildings, Allowable 
Stress Design and Plastic Design, or an equivalent code. The capability 
of the primary structural members to develop their predicted ultimate 
load capacity shall be demonstrated.
    (viii) For details of high-stress concentration, consideration shall 
be given to safety against brittle fracture and to material quailty-
control procedures.
    (5) Structural response to earthquake loads. (i) Platforms located 
in seismically active areas shall be designed to possess adequate 
strength and stiffness to withstand the effects of an earthquake which 
has a reasonable likelihood of not being exceeded during the lifetime of 
the structure (see paragraph (c)(2)(iii) of this section) and remain 
stable during rare motions of greater severity;
    (ii) The adequacy of structural strength shall be demonstrated by 
analysis to verify that no significant structural damage occurs; and
    (iii) Platforms shall also possess adequate ductility to withstand a 
rare intense earthquake.

[[Page 320]]

    (6) Fatigue assessment. (i) Structural members and joints for which 
fatigue is a probable mode of failure and for which past experiences are 
insufficient to ensure safety from possible cumulative fatigue damage 
shall be analyzed. Emphasis shall be given to joints and members in the 
splash zone, those that are difficult to inspect and repair after the 
platform is in service, and those susceptible to corrosion-accelerated 
fatigue, and
    (ii) For structural members and joints which require a detailed 
analysis of cumulative fatigue damage, the results of the analysis shall 
indicate a minimum calculated life of twice the design life (see 
Sec. 250.136(c)(1) of this part) of the platform if there is sufficient 
structural redundancy to prevent catastrophic failure of the platform as 
a result of fatigue failure of the member or joint under consideration. 
If such redundancy does not exist or if the desirable degree of 
redundancy is significantly reduced as a result of fatigue damages, the 
results of a fatigue analysis shall indicate a minimum calculated life 
of three times the design life of the platform.
    (d) Corrosion protection. All materials shall be protected from the 
effects of corrosion by a corrosion-protection system. The design of 
such systems shall take into account the possible existence of stress 
corrosion, corrosion fatigue, and galvanic corrosion. If the intended 
sea environment contains unusual contaminants, any special corrosive 
effects of such contaminants shall also be considered. Protection 
systems shall be designed in accordance with the National Association of 
Corrosion Engineers (NACE) publication, NACE Standard RP-01-76, 
Recommended Practice, Corrosion Control of Steel, Fixed Offshore 
Platforms Associated With Petroleum Production, or other comparable 
standards.
    (e) Connection of piles to structure. The attachment of the jacket 
structure to the piles shall be accomplished by positive, controlled 
means. Such attachments shall be capable of withstanding the static and 
long-term cyclic loadings to which they will be subjected.

[53 FR 10690, Apr. 1, 1988; 53 FR 26067, July 11, 1988, as amended at 61 
FR 60025, Nov. 26, 1996]



Sec. 250.138  Concrete-gravity platforms.

    (a) General. (1) This section covers the materials, analysis, 
design, and construction of reinforced and/or prestressed concrete-
gravity platforms.
    (2) Materials, structural systems, methods of design, and methods of 
construction that do not conform to the requirements of this section 
shall not be used unless it is shown that they will result in a safety 
level at least equivalent to that provided by the direct application of 
the requirements of this section.
    (b) Materials--(1) General. All materials shall be selected with due 
attention to their strength and durability in the marine environment. 
All material tests shall be performed in accordance with the latest, 
applicable standards of the American Society for Testing and Materials 
(ASTM).
    (2) Cement. (i) Cement shall be equivalent to Type I, II, or III 
portland cement as specified by ASTM C150, Specification for Portland 
Cement, or portland-pozzolan cement as specified by ASTM C595, 
Specification for Blended Hydraulic Cements. However, the suitability of 
Type III cement to serve its intended function shall be demonstrated.
    (ii) The tricalcium aluminate content of the cement shall be such as 
to enhance the corrosion protection of reinforcing steel without 
impairing the durability of concrete.
    (iii) If oil storage is planned and the oil is expected to contain 
soluble sulfates in amounts that may impair the durability of concrete, 
the tricalcium content shall be reduced or a suitable coating employed 
to protect the concrete.
    (3) Water. (i) Water used in mixing concrete shall be clean and free 
from injurious amounts of oils, acids, alkalis, salts, organic 
materials, or other substances that may be deleterious to concrete or 
steel.
    (ii) If nonpotable water is used, the proportions of materials in 
the concrete shall be based on test concrete mixes using water from the 
same source. The strength of mortar test cubes made with nonpotable 
water shall not be significantly below the strength of similar cubes 
made with potable water.

[[Page 321]]

    (iii) Water for reinforced or prestressed concrete or grout shall 
not contain chlorides and sulfates in amounts detrimental to the 
durability of the platform.
    (4) Aggregates. (i) Aggregates shall conform to the requirements of 
ASTM C33, Specifications for Concrete Aggregates. Lightweight aggregates 
conforming to ASTM C330, Specifications for Lightweight Aggregates for 
Structural Concretes, shall only be permitted if they do not pose 
durability problems and where they are used in accordance with the 
applicable provisions of the ACI publication, ACI 318, Building Code 
Requirements for Reinforced Concrete, plus Commentary.
    (ii) Marine aggregates shall be washed with fresh water before use 
to remove the surface and soluble chlorides and sulfates so that the 
total chloride and sulfate content of the concrete mix water does not 
exceed the limits of paragraph (b)(3)(iii) of this section.
    (iii) The maximum size of the aggregate shall be such that the 
concrete can be placed without voids.
    (5) Admixtures. The admixture shall be shown capable of maintaining 
essentially the same composition and performance throughout the work as 
the product used in establishing concrete proportions. Admixtures 
containing chloride ions shall not be used in prestressed concrete or in 
concrete containing aluminum embedments.
    (6) Reinforcing and prestressing systems. (i) Reinforcing and 
prestressing systems shall conform to the requirements of ACI 318; and
    (ii) Structural steel used in composite structures shall conform to 
the requirements of Sec. 250.137 of this part.
    (7) Concrete. The concrete shall be designed to ensure sufficient 
strength and durability. The quality control of concrete shall conform 
to ACI 318. The mixing, placing, and curing of concrete shall conform to 
the requirements of paragraph (e) of this section. The water-cement 
ratio shall be strictly controlled and in no case shall it exceed 0.45.
    (8) Grout for bonded tendons. (i) Grout for bonded tendons shall 
conform to ACI 318; and
    (ii) The maximum allowable contents of chlorides and sulfates 
determined in accordance with paragraph (b)(3)(iii) of this section 
shall also apply to grout mixes.
    (9) Post-tensioning ducts. Post-dentioning ducts shall conform to 
the requirements of ACI 318. Ducts and duct splices shall be watertight 
and grout-tight and shall be of suitable thickness to prevent crushing, 
deformation, and blockage.
    (10) Post-tensioning anchorages and couplers. Post-tensioning 
anchorages and couplers shall conform to the requirements of ACI 318.
    (c) Design requirements--(1) General. (i) The strength of the 
platform shall be adequate to resist failure of the platform or its 
components. Among the modes of possible failure that shall be considered 
are the following:
    (A) Loss of overall equilibrium,
    (B) Failure of critical sections, and
    (C) Instability (buckling).
    (ii) Additionally, the following items shall be considered in 
relation to their potential influences on the platform:
    (A) Cracking or spalling,
    (B) Deformations,
    (C) Corrosion of reinforcement or deterioration of concrete, and
    (D) Vibrations.
    (2) Required strength. The required strength shall conform to 
requirements of ACI 357R.
    (3) Design strength. The design strength shall conform to 
requirements of ACI 318 and ACI 357R.
    (4) Other design requirements. (i) In considering those items listed 
in paragraph (c)(1)(ii) of this section, the ability of the platform to 
withstand unfactored loads in the following combination shall be 
demonstrated:

D+T+L+E0

where L represents the most unfavorable live load; D, the dead load; T, 
the deformation load; and Eo, the operating environmental 
load, and
    (ii) Crack control design shall be achieved by limiting the crack 
width in concrete subjected to tension or by limiting the tensile stress 
in reinforcing steel and prestressing tendons.
    (5) Durability. (i) Materials, design, construction procedures, and 
quality

[[Page 322]]

control shall be such as to produce satisfactory durability of platforms 
in a marine environment, and
    (ii) The following items shall be considered in the four zones of 
exposure (see Sec. 250.136(c)(5) of this part):
    (A) Submerged zone--chemical deterioration of the concrete, 
corrosion of the reinforcement and hardware, and abrasion of the 
concrete;
    (B) Splash zone--freeze-thaw durability, corrosion of the 
reinforcement and hardware, the chemical deterioration of the concrete, 
and fire hazards;
    (C) Atmospheric zone--freeze-thaw durability, corrosion of 
reinforcement and hardware, and fire hazards; and
    (D) Ice zone--mechanical deterioration resulting from the abrasive 
action of moving ice.
    (6) Fatigue. Platforms for which fatigue is a probable mode of 
failure shall be designed to limit the effects of cumulative material 
fatigue. The effects of fatigue induced by normal stress and those 
resulting from shear and bond stress shall be considered. Particular 
attention shall be given to submerged areas subjected to the low-cycle, 
high-stress components of the anticipated loading history. If an 
analysis of the fatigue life is performed in lieu of employing other 
methods to obviate the possibility of fatigue damage, the calculated 
fatigue life of the platform shall be at least twice the design life 
(see Sec. 250.136(c)(1) of this part).
    (d) Analysis and design--(1) General. (i) The analysis of platforms 
shall be pursued under the assumptions of linearly elastic materials and 
linearly elastic structural behavior, except as listed in paragraphs 
(d)(1) (ii) and (iii) of this section.
    (ii) The inelastic behavior of concrete, based on the true variation 
of the modulus of elasticity with stress, shall be taken into account 
whenever its effect reduces the strength of the platform.
    (iii) The geometric nonlinearities and the effect of initial 
deviation of the platform from the design geometry shall be taken into 
account whenever their effects reduce the strength of the platform.
    (iv) Where appropriate, dynamic effects shall be taken into account. 
The dynamic response shall be determined by a defensible method that 
includes the effects of the foundation--platform interaction and the 
effective mass of the surrounding water.
    (v) The material properties used in the analysis shall be based on 
actual laboratory tests or shall follow the appropriate sections of ACI 
318.
    (2) Analysis of frames. The analysis of frames shall be performed by 
a defensible method of structural mechanics. The buckling strength of 
the frame shall be assessed, and the safety against buckling failure 
shall be ensured to a degree consistent with the requirements in 
paragraphs (c)(2) and (c)(3) of this section.
    (3) Analysis of plates, shells, and folded plates. The buckling 
strength of these plates shall be determined and a sufficient safety 
margin against instability shall be ensured.
    (4) Determination of deflections. Deflections shall be determined by 
a defensible method. In addition to the immediate (instantaneous) 
deflections, the long-term deflections due to creep shall be accounted 
for.
    (5) Analysis and design for bending and axial loads. The provisions 
of ACI 318 shall apply to the analysis and design of members subject to 
flexure or axial loads or to combined flexure and axial loads.
    (6) Analysis and design for shear and torsion. The provisions of ACI 
318 shall apply to the analysis and design of members subject to shear 
or torsion or to combined shear and torsion.
    (7) Analysis and design of prestressed concrete. The analysis and 
design of prestressed concrete members and structures shall comply with 
ACI 318. In addition, the safety requirements of paragraph (c) of this 
section shall be satisfied.
    (8) Details of reinforcement and prestressing systems. Details of 
reinforcement and prestressing systems shall conform to the requirements 
of ACI 318 with special attention given to the fatigue resistance and 
ultimate behavior of offshore structures.
    (9) Minimum reinforcement. The minimum amount of reinforcement shall 
conform to the requirements of ACI 318. Additionally, sufficient 
reinforcement shall be provided to control crack

[[Page 323]]

growth, especially at surfaces exposed to severe hydraulic pressures.
    (10) Concrete cover of reinforcement and prestressing tendons. The 
concrete cover of reinforcement and prestressing tendons shall be 
sufficient to provide for corrosion protection of the steel.
    (11) Seismic analysis. A dynamic analysis shall be performed to 
determine the response of the platform to design-earthquake loading. The 
platform shall be designed to withstand this loading without damage. In 
addition, a ductility check shall also be performed to ensure that the 
platform has sufficient ductility to experience deflections more severe 
than those resulting from the design-earthquake loading without the 
collapse of the platform or its foundation or any primary structural 
component.
    (12) Seismic design. The design of structural members and details of 
platforms subjected to seismic loading shall ensure maximum ductility at 
critically loaded sections.
    (e) Construction--(1) General. (i) Construction methods and 
workmanship shall conform to the provisions of ACI 318 and to the 
following requirements.
    (ii) At each stage of construction, i.e., fabrication, initial 
flotation, towing, and installation in situ, the forces acting on the 
platform shall be kept within the safety limits listed in paragraph (c) 
of this section. Appropriate static and/or dynamic analysis shall be 
performed for the operating loading conditions of each of the 
construction operations mentioned above. Buoyancy and stability shall be 
considered during all phases of construction.
    (2) Mixing, placing, and curing of concrete. (i) Mixing of concrete 
shall conform to the requirements of ACI 318 and ASTM C94, Specification 
for Ready Mixed Concrete;
    (ii) When concreting in cold weather, the temperature of the fresh 
concrete shall be maintained sufficiently above freezing until the 
process of hardening is well in progress;
    (iii) In hot weather, the temperature of the fresh concrete shall be 
controlled so that it does not impair attainment of the desired strength 
and durability;
    (iv) The methods for curing concrete shall ensure maximum 
compressive and tensile strength, durability, and a minimum of cracking; 
and
    (v) The location and workmanship of construction joints shall not 
impair the strength, crack resistance, and watertightness of the 
platform.
    (3) Reinforcement. (i) Reinforcement shall be free from loose rust, 
grease, oil, deposits of salt, or any other material that may adversely 
affect the strength, durability, or bond of the reinforcement. The 
specified cover of reinforcement shall be maintained accurately. The 
cutting, bending, and fixing of reinforcement shall ensure that it is 
correctly positioned and rigidly held.
    (ii) The welding of reinforcement shall conform to the requirements 
of AWS publication, AWS D1.4, Structural Welding Code-- Reinforcing 
Steel.
    (4) Prestressing tendons, ducts, and grouting. (i) Steps shall be 
taken to ensure that the achieved prestressing force is that specified 
in the design.
    (ii) Tendons and ducts shall be in a condition that ensures the 
required strength, durability, and bond.
    (iii) The grouting procedures shall produce the required bond 
strength of the tendons and provide permanent corrosion protection for 
the tendons. Anchorages shall also be protected adequately against 
corrosion.
[53 FR 10690, Apr. 1, 1988, as amended at 61 FR 60025, Nov. 26, 1996]



Sec. 250.139  Foundation.

    (a) General--(1) Coverage. Soil investigations, design 
considerations for the supporting soil, and the influence of the soil on 
the foundation structure are addressed in this section, including 
criteria for the strength and deformation characteristics of the 
foundation employed by both pile founded and gravity platforms.
    (2) Guidelines. (i) The degree of design conservatism shall reflect 
prior experience under similar conditions, the manner and extent of data 
collection, the scatter of design data, and the consequences of failure;
    (ii) For cases where the limits of applicability of any method of 
calculation employed are not well defined or where the soil 
characteristics are quite variable, the use of more than one method of 
calculation or a parametric

[[Page 324]]

study of the sensitivity of the important design variables shall be 
considered, and
    (iii) A listing of design parameters, necessary calculations, and 
test results shall be retained by the designer.
    (b) Site investigation--(1) General. (i) The actual extent, depth, 
and degree of precision to be obtained in the site investigation program 
shall reflect the type and intended use of the platform, characteristics 
of the site, similarity of the area based on previous site studies or 
platform installations as well as the consequences of a failure of the 
foundation. The site investigation program shall generally consist of 
three major phases as follows:
    (A) Shallow hazards (see paragraph (b)(2) of this section) to obtain 
relevant geophysical data.
    (B) Geological survey (see paragraph (b)(3) of this section) to 
obtain data of a regional nature concerning the site.
    (C) Subsurface investigation and testing (see paragraph (b)(4) of 
this section) to obtain the necessary geotechnical data. The results of 
these investigations shall be the basis for the additional site related 
studies specified in paragraph (b)(5) of this section.
    (ii) A complete site-investigation program shall be furnished for 
each platform. The positioning devices used on the vessel employed in 
the site investigation as well as those used during the installation of 
the platform shall have sufficient accuracy to ensure that the data 
obtained are pertinent to the actual final location of the platform.
    (2) Shallow hazard survey. (i) Consistent with the objectives of 
paragraph (b)(1)(i) of this section, a high-resolution or acoustic-
profiling survey shall be performed to obtain information on the 
conditions existing at and near the surface of the seafloor; and
    (ii) The information to be obtained from this survey shall include 
the following items, as appropriate, for the planned platform:
    (A) Contours of the sea bed,
    (B) Presence of any seafloor surface or near-surface anomaly or 
obstructions which would adversely affect platform installation at the 
site,
    (C) Shallow faults,
    (D) Gas seeps,
    (E) Slump blocks,
    (F) Occurrence of shallow gas, and
    (G) Ice scour of seafloor sediments.
    (3) Geological survey. (i) Background geological data shall be 
obtained to provide regional information that can affect the design and 
siting of the platform. The data shall be considered in planning the 
subsurface investigation.
    (ii) Where necessary, the seismic activity at the site shall be 
assessed. Fault zones, the extent and geometry of faulting, and 
attenuation effects of conditions in the vicinity of the site shall be 
identified.
    (iii) For platforms located in a producing area, the possibility of 
seafloor subsidence shall be considered.
    (4) Subsurface investigation and testing. (i) The primary objective 
of the subsurface investigation and testing program shall be the 
attainment of reliable geotechnical data concerning the stratigraphic 
and engineering properties of the soil. These data shall be used to 
properly design the foundation to the desired structural safety level.
    (ii) The subsurface investigation and soil testing program shall 
consist of adequate in situ testing, boring, and sampling to examine all 
important soil and rock strata. The testing program shall reveal the 
necessary strength, classification, and deformation properties of the 
soil. Further tests, as needed, shall describe the dynamic 
characteristics of the soil.
    (iii) At least one borehole having a minimum depth of the 
anticipated length of the pile plus a zone of influence shall be drilled 
at the installation site for a pile-supported platform. Previously 
gathered borehole data may be used on a case-by-case basis, when 
approved by the Regional Supervisor. The zone of influence shall be 
sufficient to ensure that punch through failures will not occur. 
Additional boreholes of a lesser depth shall be required by the Regional 
Supervisor if discontinuities in the soil are indicated to exist in the 
area of the platform.
    (iv) For a gravity-type platform foundation, the required depth of 
the borehole shall be equal to at least the depth of the zone of 
influence which the structure imposes on the supporting soil. Where 
possible, in situ tests shall

[[Page 325]]

be performed to a depth that will include the anticipated shearing 
failure zone.
    (v) When samples from the field are sent to a laboratory for further 
testing, they shall be packed carefully and accurately labeled, and the 
results of visual inspections shall be recorded.
    (vi) A summary report showing the results of the soil testing 
program shall be prepared. The report shall describe briefly the various 
field and laboratory test methods employed and shall indicate the 
applicability of these methods as they relate to the quality of the 
sample, the type of soil, and the anticipated design application.
    (vii) The engineering properties of the soil to be used in the 
design shall be listed for each stratum. The selected design properties 
shall specify the uncertainties inherent in the overall testing program 
and in the reliability and applicability of the individual test methods.
    (5) Additional requirements. Based on the results of the overall 
site investigation program, studies shall be performed, as applicable, 
to assess the following effects of the installed platform:
    (i) Scouring potential of the seafloor,
    (ii) Hydraulic instability and the occurrence of sand waves,
    (iii) Instability of slopes in the area where the platform is to be 
placed,
    (iv) Liquefaction and/or possible reduction of soil strength due to 
increased pore pressures, and
    (v) Degradation of subsea permafrost layers.
    (c) Foundation design requirements--(1) General. (i) The loadings 
used in the design of the foundation shall include those defined in 
paragraph (c)(6)(ii) of this section.
    (ii) Foundation displacements shall be evaluated to ensure that they 
are within limits that do not impair the intended function and safety of 
the platform.
    (iii) The soil and the platform shall be considered as an 
interactive system, and the results of the analysis as required in 
paragraphs (c)(2) through (c)(6) of this section shall be evaluated from 
this point of view.
    (2) Cyclic loading effects. Evaluation of the short-term and long-
term effects of cyclic loading with respect to changes in soil 
characteristics, whether caused by conditions during installation, 
seismic activity, or storms, shall be accomplished by using defensible 
methods.
    (3) Scour. (i) For unprotected foundations, the depth and lateral 
extent of scouring, as determined in the site investigation program, 
shall be accounted for in design; and
    (ii) If scour is not accounted for in design, either effective 
protection shall be furnished soon after the installation of the 
platform or frequent visual inspection shall be carried out, 
particularly after major storms.
    (4) Settlements and displacements. (i) Based on the type and 
function of the platform, tolerable limits shall be established for 
settlements and lateral deflections. Due consideration shall be given to 
the effect of these movements on risers, pilings, and other components 
which interact with the platform;
    (ii) Maximum allowable values of platform movements, as limited by 
these structural considerations or overall platform stability, shall be 
considered in the design.
    (5) Dynamic considerations. (i) For dynamic-loading conditions, a 
defensible method shall be employed to simulate the interactive effects 
between the soil and the platform, and
    (ii) The evaluation of the dynamic response of the platform shall 
account for, as appropriate, the nonlinear and inelastic characteristics 
of the soil, the possible deterioration of strength, the increased or 
decreased damping due to cyclic soil loading, and the influence of 
nearby platforms.
    (6) Loading conditions. (i) Loadings producing the worst effects on 
the foundation during and after installation shall be addressed; and
    (ii) In-place platform loadings to be checked shall include at least 
those relating to both the operating and design environmental 
conditions, combined in accordance with the following:
    (A) Operating environmental conditions with dead and live loads 
appropriate to the function and operation of the platform,
    (B) Design environmental conditions with dead and live loads 
appropriate to

[[Page 326]]

the function and operation of the platform, and
    (C) Design environmental conditions with dead and minimum live loads 
appropriate to the function and operation of the platform.
    (d) Pile foundations--(1) General. The following requirements apply 
to pile-founded platforms. Pertinent parts of these requirements dealing 
with steel design shall be consulted regarding the design of the steel 
piles.
    (i) In the design of individual piles and piles in a group, the 
effects of axial, bending, and lateral loads shall be addressed.
    (ii) The design of a pile shall reflect the interactive behavior 
between the soil and the pile, between the pile and the platform, and 
between piles in a group.
    (iii) Methods of pile installation shall be consistent with the type 
of soil at the site and the installation equipment available. If 
unexpectedly high-driving resistance or other conditions lead to a 
failure of the pile to reach the desired penetration, the pile's 
capacities shall be reevaluated by considering the actual installation 
situation.
    (iv) Pile driving shall be performed and supervised by qualified and 
experienced personnel. Driving records which include such information as 
blowcounts and estimated hammer performance and stoppages shall be 
retained.
    (v) Where necessary, the effects of bottom instability in the 
vicinity of the platform shall be assessed.
    (2) Axial piles. (i) For piles in compression, the axial capacity 
shall be considered to consist of the skin friction, Qf, 
developed along the length of the pile and the end bearing, 
Qp, at the tip of the pile. The various parameters needed to 
evaluate Qf and Qp shall be predicted by using a 
defensible analytical method that employs reliably obtained soil data 
consistent with the prediction method selected. The acceptability of any 
method used to predict the components of pile resistance shall be 
demonstrated by showing satisfactory performance of the method under 
conditions similar to those existing at the actual site.
    (ii) The results of the dynamic pile driving analysis alone shall 
not be used to predict the axial load capacity of a pile.
    (iii) For piles driven through clay, the estimated skin friction 
developed over any increment of the pile surface shall not exceed the 
shear strength of the clay.
    (iv) The capacity of the internal plug of an open-ended pile shall 
be considered since it may limit the estimated end bearing to the pile.
    (v) When combining side friction and end-bearing effects in 
determining axial pile capacity, the load deflection response of the 
soil-pile system shall be addressed.
    (vi) For piles subjected to pullout loads, the contribution of the 
end resistance of the pile to its axial capacity shall not be 
considered. The possible variation of predicted pile-skin friction 
between the compressive and tensile modes of the axial-pile loading 
shall be considered.
    (3) Laterally loaded piles. (i) In evaluating the pile's behavior 
when acted upon by lateral loadings, the combined load deflection 
characteristics of the soil and the pile and the pile and the platform 
shall be addressed.
    (ii) The representation of the soil's lateral displacement when it 
is subjected to lateral loads shall adequately reflect the deterioration 
of the lateral load capacity when the soil is subjected to cyclic 
loading.
    (iii) The description of the lateral load versus displacement 
characteristics for the various soil strata shall be based on 
constitutive data obtained from suitable soil tests. The use of 
empirical methods to provide the description of the soil's lateral 
response shall be permitted if such methods are documented.
    (iv) Where applicable, the rapidly deteriorating cyclic lateral load 
capacity of stiff clays, especially those exhibiting the presence of a 
secondary structure, shall be addressed in the design.
    (v) Calculation of pile deflection and stress induced by lateral 
loads shall account for the nonlinear interaction between the soil and 
the pile.
    (4) Pile groups. Where applicable, the effects of close spacing on 
the load and deflection characteristics of pile groups shall be 
determined. The allowable load for a group, both axial and

[[Page 327]]

lateral, shall not exceed the sum of the apparent individual pile 
allowable loads.
    (5) Plastic analysis. When the design of a platform is based on the 
formation collapse mechanisms associated with a plastic analysis method, 
influence of the soil's support on the pile shall be addressed.
    (e) Gravity platforms foundations--(1) General. The following 
requirements apply to soil foundations for gravity platforms. Section 
250.138 of this part shall be consulted regarding the design of the base 
slab.
    (i) The influence of hydraulic and slope instability, if any, shall 
be determined for the structural loading cases that include the design 
environmental loading.
    (ii) The effects of adjacent platforms and the variation of soil 
properties in the horizontal direction shall be considered, as 
appropriate.
    (iii) The stability of the foundation with regard to bearing and 
sliding failure modes shall be investigated by employing the soil shear 
strengths determined with consideration of paragraphs (b)(4) and (c)(2) 
of this section.
    (iv) When an underpressure or overpressure is experienced by the 
seafloor under the platform, provisions shall be made to prevent piping 
that could impair the integrity of the foundation.
    (v) Initial, consolidation, and secondary settlements, as well as 
permanent horizontal displacements, shall be determined.
    (vi) If the intended site is not level, the predicted tilt of the 
overall platform shall be based on the average bottom slope of the 
seafloor and the tolerance of the measuring device used in the site-
investigation program. Differential settlement shall also be calculated 
and the tilting of the platform caused by this settlement shall be 
combined with the predicted structural tilt of the overall platform. Any 
increased loading effects caused by tilting of the platform shall be 
addressed in stability requirements specified for the foundation.
    (2) Stability. (i) The bearing capacity and lateral resistance shall 
be calculated by considering the most unfavorable combination of loads. 
The long-term redistribution of bearing pressures under the base slab 
shall be considered to ensure that the maximum edge pressures are used 
in the design of the base.
    (ii) The lateral resistance of the platform shall be investigated 
considering various potential shearing planes. The presence of any soft 
layers shall require special consideration.
    (iii) Calculations for overturning moment and vertical forces 
induced by the passage of a wave shall include the vertical pressure 
distribution across the top of the foundation and along the seafloor. 
The foundation shall not lose contact with the soil due to uplift 
created by the maximum overturning moment.
    (iv) The capacity of the foundation to resist a deep-seated bearing 
failure shall be analyzed.
    (v) Where present, the additional effects of penetrating walls or 
skirts that transfer vertical and lateral loads to the soil shall be 
investigated for their contribution to bearing load capacity and lateral 
resistance.
    (3) Soil reaction on the platform. (i) For conditions during and 
after installation, the reaction of the soil against all structural 
members seated on or penetrating into the seafloor shall be determined 
and accounted for in the design of these members.
    (ii) The distribution of soil reactions shall be based on the 
results obtained in paragraphs (b)(2) and (b)(4) of this section, and 
the calculations of soil reactions shall account for any deviation from 
a plane surface, the load-deflection characteristics of the soil, and 
the geometry of the platform base.
    (iii) Where applicable, effects of local soil stiffening, 
nonhomogeneous soil properties, and boulders and other obstructions 
shall be addressed in the design. During installation, the possibility 
of local contact pressures due to irregular contact between the base and 
the seafloor shall be considered. Contact pressures shall be added to 
the hydrostatic pressure.
    (iv) The penetration resistance of structural elements projecting 
into the seafloor below the foundation structure shall be analyzed. The 
design of the ballasting system shall reflect uncertainties associated 
with achieving the required penetration of the platform.

[[Page 328]]



Sec. 250.140  Marine operations.

    (a) General--(1) Marine operations means all activities necessary 
for the transportation and installation of a platform from the time it 
enters the marine environment until it is fixed in place at its final 
destination. Marine operations generally include such activities as 
follows:
    (i) Lifting and mooring,
    (ii) Loadout or initial flotation,
    (iii) Fabrication afloat,
    (iv) Towing,
    (v) Launching and uprighting,
    (vi) Submergence,
    (vii) Pile installation, and
    (viii) Final field erection.
    (2) The requirements of this section apply to all platforms covered 
by this subpart, regardless of structural type or material of 
construction.
    (b) Objective. The structural strength and integrity of a platform 
shall not be reduced or otherwise jeopardized by the performance of the 
activities required to install the platform on site. The type and 
magnitude of loads and load combinations to which a platform will be 
exposed during marine operations shall be the subject of an analysis 
pursuant to paragraph (c) of this section, except where the use of 
proven and well-controlled methods of fabrication and installation are 
proposed and justified. Sufficient equipment shall be provided to ensure 
installation of the platform in a safe and well-controlled manner.
    (c) Analysis. (1) Analyses shall be performed to determine the type 
and magnitude of the loads and load combinations to which the platform 
will be exposed during the performance of marine operations.
    (2) Analyses shall be performed to ensure that the structural design 
is sufficient to withstand the type and magnitude of the loads and load 
combinations determined, in accordance with paragraph (c)(1) of this 
section, without loss or degradation of structural integrity.
    (3) Analyses shall be performed to ensure that the platform or its 
means of support has sufficient hydrostatic stability and reserve 
buoyancy to allow for successful execution of all phases of marine 
operations.



Sec. 250.141  Inspection during construction.

    (a) General--(1) Coverage. All pile-supported and gravity platforms 
covered by this subpart shall be inspected during the construction 
phase. Additional requirements for steel pile-supported platforms are 
contained in paragraph (b) of this section, and additional requirements 
pertaining to concrete-gravity platforms are contained in paragraph (c) 
of this section. The phases of construction subject to inspection 
include material manufacture, fabrication, loadout, transportation, 
positioning, installation, and final field erection.
    (2) Objective. Inspections during construction are to verify that 
the platform is constructed in accordance with the approved construction 
plan. Any unusual or innovative application of materials or methods of 
construction not adequately covered by the requirements of this section 
shall receive special attention during compliance inspections relevant 
to its effect on the integrity of the platform.
    (3) Remedial action. If construction inspection results reveal that 
materials, procedures, or workmanship deviate significantly from the 
approved design, remedial action shall be taken.
    (4) Identification of materials. The origin of materials used in the 
platform and the results of relevant material tests for all significant 
structural materials shall be retained and made readily available for 
inspection by MMS representatives during all stages of construction. 
Records shall be kept of the locations throughout the platform of the 
various heat numbers for such materials.
    (b) Steel pile-supported platforms--(1) Scope. Inspections of steel 
pile-supported platforms shall address the following topics, as 
appropriate:
    (i) Material quality and forming,
    (ii) Welder and welding procedure qualifications,
    (iii) Weld inspection,
    (iv) Tolerances and alignments, and
    (v) Corrosion-control systems.
    (2) Material quality and forming. Inspection shall verify that all 
materials employed are of good quality and suitable for their intended 
service as specified in the approved design. Inspection

[[Page 329]]

shall ensure the compliance of materials to the relevant material 
standards selected in the design of the platform. Inspection shall 
ensure that formed members satisfy the dimensional tolerances listed in 
the design.
    (3) Welder and welding-procedure qualifications. (i) Welders shall 
be tested and possess a current welder's certification.
    (ii) All welding procedures to be employed shall be tested and 
certified for the production of satisfactory welds. Welding procedures 
previously tested and certified shall be considered prequalified.
    (4) Weld inspection. (i) Inspection shall include, but not be 
limited to, visual inspection of all welds and representative magnetic 
particle or dye penetrant inspection of welds of Weld Classes A and B 
materials (see Sec. 250.137(a)(4) of this part) not subjected to 
ultrasonic or radiographic inspection. The extent of ultrasonic or 
radiographic inspection shall be specified and shall emphasize, but not 
be confined to, welds of Weld Class A materials.
    (ii) The extent and methods of inspection shall be consistent with 
the classification of applications (see Sec. 250.137(a)(4) of this part) 
of the area being examined.
    (iii) Any welding not meeting the acceptance criteria specified in 
the inspection plan shall be rejected and appropriate remedial action 
taken.
    (5) Tolerances and alignments. Overall dimensional tolerances, 
forming tolerances, and local alignment tolerances shall be commensurate 
with those considered in developing the structural design. Inspections 
shall ensure that the dimensional tolerance criteria are being met. Out 
of roundness of structural elements for which buckling is the 
anticipated mode of failure shall receive individual inspection.
    (6) Corrosion-control systems. Corrosion-control systems employed on 
the platform shall be inspected to ensure that they are installed as 
specified in the approved design. Inspection shall ensure that proper 
protection against galvanic effects, especially in locations where 
nonferrous materials are used in conjunction with steel, has been 
provided in the corrosion-control system.
    (7) Additional inspection items. (i) The provisions of paragraphs 
(b)(2) through (b)(6) of this section relate only to matters directly 
affecting the onshore construction phases of the platform. Other items 
relating to the onshore construction site and the construction phases 
from loadout to final erection shall also be performed.
    (ii) The construction site shall be inspected to ensure that 
adequate consideration has been given to the following items:
    (A) Support of the platform during construction,
    (B) Employment of a sufficient number of certified welders and 
inspectors to maintain an adequate quality of work, and
    (C) Weathertight storage of welding consumables under conditions 
specified by their manufacturers.
    (iii) Inspection shall verify that the following operations have 
been accomplished in a manner conforming to approved plans or drawings:
    (A) Loadout,
    (B) Tie down,
    (C) Positioning at the site,
    (D) Installation (see Sec. 250.139(d)(1)(iv) of this part for 
piles), and
    (E) Final field erection.
    (iv) To determine if overstressing of the platform during 
transportation has occurred, towing records shall be reviewed to 
ascertain if conditions during towing operations exceeded those employed 
in the analyses required by Sec. 250.140(c) of this part.
    (v) When the inspections indicate that overstressing has occurred 
during loadout, transportation, or installation, the affected parts of 
the platform shall be surveyed to determine the extent of actual damage, 
if any. Where necessary, a reevaluation of the structural capacity shall 
be carried out, considering the results of the survey.
    (8) Records. The following construction records shall be compiled, 
retained, and made available for inspection by MMS representatives:
    (i) Mill certificates,
    (ii) Weld-procedure qualification records,
    (iii) Weld inspection records,
    (iv) Dimensional tolerance reports,
    (v) Towing records, and
    (vi) Pile driving records.

[[Page 330]]

    (c) Concrete-gravity platforms--(1) Scope. Inspection of concrete-
gravity platforms shall address the following topics, as appropriate:
    (i) Preparation for concrete production and placement;
    (ii) Batching, mixing, and placing concrete;
    (iii) Form removal and concrete curing;
    (iv) Pretensioning and grouting;
    (v) Joints; and
    (vi) Finished concrete.
    (2) Preparation for concrete production and placement. (i) 
Inspection shall ensure that the pertinent physical properties of 
cement, reinforcing steel, prestressing tendons, and appurtenances 
comply with those specified in the approved design.
    (ii) Forms and shoring supporting the forms shall be inspected to 
ensure that they are adequate in number and type and are located 
correctly.
    (iii) The dimensional tolerances of the forms shall be inspected to 
ensure that the finished dimensional tolerances are comparable to those 
allowed for in the approved design.
    (iv) Reinforcing steel, prestressing tendons, post-tensioning ducts, 
anchorages, and any other embedded steel shall be inspected, as 
appropriate, for size, bending, spacing, location, firmness of 
installation, surface condition, vent locations, proper duct coupling, 
and duct capping.
    (3) Batching, mixing, and placing concrete. (i) Inspections shall be 
performed to ensure that the procedures for the production and placement 
of concrete provide a well-mixed and well-compacted concrete. The 
procedures shall also limit segregation, loss of material, 
contamination, and premature initial set during all operations.
    (ii) Inspection shall verify that the mix components of each batch 
of concrete are properly proportioned and within allowable variations 
specified in the approved design. Inspection shall ensure that the 
water/cement ratio of each batch is within the limit specified in 
Sec. 250.138(b)(7) of this part.
    (iii) Aggregate gradation, cleanliness, moisture content, and unit 
weight shall be tested. The frequency of testing shall be determined 
taking into account the uniformity of the supply source, volume of 
concrete used, and variations of atmospheric conditions.
    (iv) Mix water shall be tested for purity following specified 
methods and schedules.
    (v) Testing during the production of concrete shall be performed to 
monitor, as a minimum, the following concrete qualities:
    (A) Consistency,
    (B) Air content, and
    (C) Strength.
    (4) Form removal and concrete curing. (i) Inspection shall ensure 
that forms and form supports are not removed until the platform has 
attained sufficient strength to bear its own weight, construction loads, 
and anticipated environmental loads without undue deformation and that 
they are removed according to schedule.
    (ii) Inspection shall ensure that curing of concrete is accomplished 
in accordance with the provisions of a predetermined procedure.
    (iii) Where the construction procedures require the submergence of 
recently placed concrete, inspection shall ensure that methods for 
protecting the concrete from the effects of salt water are properly 
executed.
    (5) Pretensioning and grouting. (i) Inspection shall verify that the 
sequence of tendon tensioning and the resulting elongation and force are 
in accordance with provisions specified in the approved design.
    (ii) Pretensioning or post-tensioning stress shall be determined by 
measuring both tendon elongation and tendon force. Inspection shall 
verify that the variation of measurements does not exceed a specified 
amount.
    (iii) Inspection shall verify that grout mix proportions and ambient 
conditions during mixing are in accordance with provisions designated in 
the approved design. Tests for grout, viscosity expansion, bleeding, 
compressive strength, and setting time shall be performed to ensure 
compliance with design requirements. Procedures shall be observed to 
ensure that ducts are completely filled.
    (iv) Anchorages shall be inspected to ensure that they are located 
and sized

[[Page 331]]

as specified in the design and are provided with adequate cover to 
mitigate the effects of corrosion.
    (6) Joints. Where appropriate, leak testing of construction joints 
shall be performed by using specified procedures. When deciding which 
joints to inspect, consideration shall be given to the hydrostatic head 
on the subject joint during normal operation, the consequence of a leak 
at the subject joint, and the ease of repair once the platform is in 
service.
    (7) Finished concrete. (i) The surface of the hardened concrete 
shall be completely inspected for cracks, honeycombing, popouts, 
spalling, and other surface imperfections.
    (ii) The platform shall be examined by using a calibrated rebound 
hammer or a similar nondestructive examination device. Inspection shall 
verify that the results of surface inspection, cylinder strength test, 
or nondestructive examination are in accordance with the approved design 
criteria.
    (iii) The completed sections of the platform shall be checked for 
compliance to specified design tolerances of thickness and alignment 
and, to the extent practicable, the location of reinforcing and 
prestressing steel and post-tensioning ducts.
    (8) Additional inspection items. (i) While the provisions of 
paragraphs (c)(2) through (c)(7) of this section relate only to some 
matters directly affecting the onshore or nearshore construction phases 
of the platform, other items relating to such phases and from loadout to 
final erection shall also be considered.
    (ii) Inspection shall ensure that adequate consideration has been 
given the following items:
    (A) Support of the structure during construction,
    (B) Employment of a sufficient number of competent workmen and 
inspectors to maintain an adequate quality of work,
    (C) Storage of cement and prestressing tendons in weathertight 
areas,
    (D) Storage of admixtures and epoxies according to manufacturers' 
specifications, and
    (E) Storage of aggregates to limit segregation, contamination by 
deleterious substances, and moisture variations within the stockpile.
    (iii) Inspection shall verify that the following operations, as 
applicable to the planned platform, have been accomplished in a manner 
conforming to approved plans or drawings developed for these operations:
    (A) Loadout,
    (B) Towing arrangements,
    (C) Positioning at the site,
    (D) Installation, and
    (E) Final field erection.
    (iv) To determine if overstressing of the platform during 
transportation has occurred, towing records shall be reviewed to 
ascertain if conditions during the towing operations exceeded those 
employed in the analyses required by Sec. 250.140(c) of this part.
    (9) Records. The following construction records shall be compiled, 
retained, and made available for inspection by MMS representatives:
    (i) Material certificates and test reports;
    (ii) Tensioning and grouting records;
    (iii) Concreting records including weight, moisture content, mix 
proportions, test methods and results, ambient conditions during the 
pour, and test equipment calibration data;
    (iv) Deviations from design or fabrication specifications and 
repairs carried out;
    (v) Towing records; and
    (vi) Data on initial structural settlements.

[53 FR 10690, Apr. 1, 1988; 53 FR 26067, July 11, 1988]



Sec. 250.142  Periodic inspection and maintenance.

    (a) All platforms installed in the OCS shall be inspected 
periodically in accordance with the provisions of API RP 2A, section 14, 
Surveys. However, use of an inspection interval which exceeds 5 years 
shall require prior approval by the Regional Supervisor. Proper 
maintenance shall be performed to assure the structural integrity of the 
platform as a workbase for oil and gas operations.
    (b) A report shall be submitted annually on November 1 to the 
Regional Supervisor stating which platforms have been inspected in the 
preceding 12

[[Page 332]]

months, the extent and area of inspection, and the type of inspection 
employed, i.e., visual, magnetic particle, ultrasonic testing. A summary 
of the testing results shall be submitted indicating what repairs, if 
any, were needed and the overall structural condition of the platform.

[53 FR 10690, Apr. 1, 1988, as amended at 55 FR 51415, Dec. 14, 1990]



Sec. 250.143  Platform removal and location clearance.

    (a) The lessee shall remove all structures in a manner approved by 
the Regional Supervisor to assure that the location has been cleared of 
all obstructions to other activities in the area.
    (b) All platforms (including casing, wellhead equipment, templates, 
and piling) shall be removed by the lessee to a depth of at least 15 
feet below the ocean floor or to a depth approved by the Regional 
Supervisor based upon the type of structure or ocean-bottom conditions.
    (c) The lessee shall verify by appropriate means that the location 
has been cleared of all obstructions. The results of the location 
clearance survey shall be submitted to the Regional Supervisor by means 
of a letter from the company performing the work certifying that the 
area was cleared of all obstructions, the date the work was performed, 
the extent of the area surveyed, and the survey method used.



Sec. 250.144  Records.

    The lessee shall compile, retain, and make available to Minerals 
Management Service representatives for the functional life of all 
platforms, the as-built structural drawings, the design assumptions and 
analyses, a summary of the nondestructive examination records, and the 
inspection results from platform inspections required by Sec. 250.142 of 
this part.



             Subpart J--Pipelines and Pipeline Rights-of-Way



Sec. 250.150  General requirements.

    (a) Pipelines and associated valves, flanges, and fittings shall be 
designed, installed, operated, maintained, and abandoned to provide safe 
and pollution-free transportation of fluids in a manner which does not 
unduly interfere with other uses in the Outer Continental Shelf (OCS).
    (b) An application shall be submitted to the Regional Supervisor and 
approval obtained prior to the installation, modification, or 
abandonment of a pipeline which qualifies as a lease term pipeline (see 
Sec. 250.151, Definitions) and prior to the installation of a right-of-
way pipeline or the modification or relinquishment of a pipeline right-
of-way.
    (c) A pipeline which qualifies under the Department of the 
Interior's (DOI) jurisdiction (DOI pipeline) shall meet the requirements 
of Sec. 250.150 through 250.158 of this subpart. The DOI's exclusive 
jurisdiction with respect to pipeline activities extends upstream from 
the outlet flange at each facility where produced hydrocarbons are first 
separated, dehydrated, or otherwise processed to each production well in 
the OCS. In addition, those pipelines necessary for the development of a 
lease, e.g., gas-lift gas or supply pipelines, are under DOI's exclusive 
jurisdiction.
    (d) A pipeline which qualifies as a right-of-way pipeline (see 
Sec. 250.151, Definitions) shall not be installed until a right-of-way 
has been requested and granted in accordance with this subpart.
    (e)(1) The Regional Supervisor may suspend any pipeline operation 
upon a determination by the Regional Supervisor that continued activity 
would threaten or result in serious, irreparable, or immediate harm or 
damage to life (including fish and other aquatic life), property, 
mineral deposits, or the marine, coastal, or human environment.
    (2) The Regional Supervisor may also suspend pipeline operations or 
a right-of-way grant if the Regional Supervisor determines that the 
lessee or right-of-way holder has failed to comply with a provision of 
the Act or any other applicable law, a provision of these or other 
applicable regulations, or a condition of a permit or right-of-way 
grant.
    (3) The Secretary of the Interior (Secretary) may cancel a pipeline 
permit or right-of-way grant in accordance with 43 U.S.C. 1334(a)(2). A 
right-

[[Page 333]]

of-way grant may be forfeited in accordance with 43 U.S.C. 1334(e).



Sec. 250.151  Definitions.

    Terms used in this subpart shall have the meanings given below:
    Lease term pipelines are those pipelines owned and operated by a 
lessee or operator and are wholly contained within the boundaries of a 
single lease, unitized leases, or contiguous (not cornering) leases of 
that lessee or operator.
    Pipelines are the piping, risers, and appurtenances installed for 
the purpose of transporting oil, gas, sulphur, and produced water. 
(Piping confined to a production platform or structure is covered in 
Subpart H, Production Safety Systems, and is excluded from this 
subpart.)
    Right-of-way pipelines are those pipelines which--
    (a) Are contained within the boundaries of a single lease or group 
unitized leases but are not owned and operated by the lessee or operator 
of that lease or unit,
    (b) Are contained within the boundaries of contiguous (not 
cornering) leases which do not have a common lessee or operator,
    (c) Are contained within the boundaries of contiguous (not 
cornering) leases which have a common lessee or operator but are not 
owned and operated by that common lessee or operator, or
    (d) Cross any portion of an unleased block(s).



Sec. 250.152  Design requirements for DOI pipelines.

    (a) The internal design pressure for steel pipe shall be determined 
in accordance with the following formula:

                                                                        
        2(S)(t)                                                         
  P=  ----------                        X(F)(E)(T)                      
           D                                                            
                                                                        

For limitations see section 841.121 of American National Standards 
Institute (ANSI) B31.8 where--

P=Internal design pressure in pounds per square inch (psi).
S=Specified minimum yield strength, in psi, stipulated in the 
          specification under which the pipe was purchased from the 
          manufacturer or determined in accordance with section 
          811.253(h) of ANSI B31.8.
D=Nominal outside diameter of pipe, in inches.
t=Nominal wall thickness, in inches.
F=Construction design factor of 0.72 for the submerged component and 
          0.60 for the riser component.
E=Longitudinal joint factor obtained from Table 841.1B of ANSI B31.8. 
          (See also section 811.253(d)).
T=Temperature derating factor obtained from Table 841.1C of ANSI B31.8.

    (b)(1) Pipeline valves shall meet the minimum design requirements of 
American Petroleum Institute (API) Spec 6A, API Spec 6D, or the 
equivalent. A valve may not be used under operating conditions that 
exceed the applicable pressure-temperature ratings contained in those 
standards.
    (2) Pipeline flanges and flange accessories shall meet the minimum 
design requirements of ANSI B16.5, API Spec 6A, or the equivalent. Each 
flange assembly must be able to withstand the maximum pressure at which 
the pipeline is to be operated and to maintain its physical and chemical 
properties at any temperature to which it is anticipated that it might 
be subjected in service.
    (3) Pipeline fittings shall have pressure-temperature ratings based 
on stresses for pipe of the same or equivalent material. The actual 
bursting strength of the fitting shall at least be equal to the computed 
bursting strength of the pipe.
    (c) The maximum allowable operating pressure (MAOP) shall not exceed 
the least of the following:
    (1) Internal design pressure of the pipeline, valves, flanges, and 
fittings;
    (2) Eighty percent of the hydrostatic pressure test (HPT) of the 
pipeline; or
    (3) If applicable, the MAOP of the receiving pipeline when the 
proposed pipeline and the receiving pipeline are connected at a subsea 
tie-in.
    (d) If the maximum source pressure (MSP), exceeds the pipeline's 
MAOP, redundant safety devices meeting the requirements of section A9 of 
API RP 14C shall be installed and maintained. Pressure safety valves 
(PSV) may be used only after a determination by the Regional Supervisor 
that the pressure will be relieved in a safe and pollution-free manner. 
The setting level at which the primary and redundant safety

[[Page 334]]

equipment actuates shall not exceed the pipeline's MAOP.
    (e) Pipelines shall be provided with an external protective coating 
capable of minimizing underfilm corrosion and a cathodic protection 
system designed to mitigate corrosion for at least 20 years.
    (f) Pipelines shall be designed and maintained to mitigate any 
reasonably anticipated detrimental effects of water currents, storm or 
ice scouring, soft bottoms, mud slides, earthquakes, subfreezing 
temperatures, and other environmental factors.



Sec. 250.153  Installation, testing, and repair requirements for DOI pipelines.

    (a)(1) Pipelines greater than 8-5/8 inches in diameter and installed 
in water depths of less than 200 feet shall be buried to a depth of at 
least 3 feet unless they are located in pipeline congested areas or 
seismically active areas as determined by the Regional Supervisor. 
Nevertheless, the Regional Supervisor may require burial of any pipeline 
if the Regional Supervisor determines that such burial will reduce the 
likelihood of environmental degradation or that the pipeline may 
constitute a hazard to trawling operations or other uses. A trawl test 
or diver survey may be required to determine whether or not pipeline 
burial is necessary or to determine whether a pipeline has been properly 
buried.
    (2) Pipeline valves, taps, tie-ins, capped lines, and repaired 
sections that could be obstructive shall be provided with at least 3 
feet of cover unless the Regional Supervisor determines that such items 
present no hazard to trawling or other operations. A protective device 
may be used to cover an obstruction in lieu of burial if it is approved 
by the Regional Supervisor prior to installation.
    (3) Pipelines shall be installed with a minimum separation of 18 
inches at pipeline crossings and from obstructions.
    (4) Pipeline risers installed after April 1, 1988, shall be 
protected from physical damage that could result from contact with 
floating vessels. Riser protection on pipelines installed on or before 
April 1, 1988, may be required when the Regional Supervisor determines 
that significant damage potential exists.
    (b)(1) Pipelines shall be hydrostatically tested with water at a 
stabilized pressure of at least 1.25 times the MAOP for at least 8 hours 
when installed, relocated, uprated, or reactivated after being out-of-
service for more than 1 year.
    (2) Prior to returning a pipeline to service after a repair, the 
pipeline shall be pressure tested with water or processed natural gas at 
a minimum stabilized pressure of at least 1.25 times the MAOP for at 
least 2 hours.
    (3) Pipelines shall not be pressure tested at a pressure which 
produces a stress in the pipeline in excess of 95 percent of the 
specified minimum-yield strength of the pipeline. A temperature recorder 
measuring test fluid temperature synchronized with a pressure recorder 
along with deadweight test readings shall be employed for all pressure 
testing. When a pipeline is pressure tested, no observable leakage shall 
be allowed. Pressure gauges and recorders shall be of sufficient 
accuracy to verify that leakage is not occurring.
    (4) The Regional Supervisor may require pressure testing of 
pipelines to verify the integrity of the system when the Regional 
Supervisor determines that there is a reasonable likelihood that the 
line has been damaged or weakened by external or internal conditions.
    (c) When a pipeline is repaired utilizing a clamp, the clamp shall 
be a full encirclement clamp able to withstand the anticipated pipeline 
pressure.

[53 FR 10690, Apr. 1, 1988; 53 FR 12227, Apr. 13, 1988; 57 FR 26997, 
June 17, 1992]



Sec. 250.154  Safety equipment requirements for DOI pipelines.

    (a) The lessee shall ensure the proper installation, operation, and 
maintenance of safety devices required by this section on all incoming, 
departing, and crossing pipelines on platforms.
    (b)(1)(i) Incoming pipelines to a platform shall be equipped with a 
flow safety valve (FSV).
    (ii) For sulphur operations, incoming pipelines delivering gas to 
the power plant platform may be equipped with high- and low-pressure 
sensors (PSHL),

[[Page 335]]

which activate audible and visual alarms in lieu of requirements in 
paragraph (b)(1)(i) of this section. The PSHL shall be set at 15 percent 
or 5 psi, whichever is greater, above and below the normal operating 
pressure range.
    (2) Incoming pipelines boarding to a production platform shall be 
equipped with an automatic shutdown valve (SDV) immediately upon 
boarding the platform. The SDV shall be connected to the automatic- and 
remote-emergency shut-in systems.
    (3) Departing pipelines receiving production from production 
facilities shall be protected by high- and low-pressure sensors (PSHL) 
to directly or indirectly shut in all production facilities. The PSHL 
shall be set not to exceed 15 percent above and below the normal 
operating pressure range. However, high pilots shall not be set above 
the pipeline's MAOP.
    (4) Crossing pipelines on production or manned nonproduction 
platforms which do not receive production from the platform shall be 
equipped with an SDV immediately upon boarding the platform. The SDV 
shall be operated by a PSHL on the departing pipelines and connected to 
the platform automatic- and remote-emergency shut-in systems.
    (5) The Regional Supervisor may require that oil pipelines be 
equipped with a metering system to provide a continuous volumetric 
comparison between the input to the line at the structure(s) and the 
deliveries onshore. The system shall include an alarm system and shall 
be of adequate sensitivity to detect variations between input and 
discharge volumes. In lieu of the foregoing, a system capable of 
detecting leaks in the pipeline may be substituted with the approval of 
the Regional Supervisor.
    (6) Pipelines incoming to a subsea tie-in shall be equipped with a 
block valve and an FSV. Bidirectional pipelines connected to a subsea 
tie-in shall be equipped with only a block valve.
    (7) Gas-lift or water-injection pipelines on unmanned platforms need 
only be equipped with an FSV installed immediately upstream of each 
casing annulus or the first inlet valve on the christmas tree.
    (8) Bidirectional pipelines shall be equipped with a PSHL and an SDV 
immediately upon boarding each platform.
    (9) Pipeline pumps shall comply with Section A7 of API RP 14C. The 
setting levels for the PSHL devices are specified in paragraph (b)(3) of 
this section.
    (c) If the required safety equipment is rendered ineffective or 
removed from service on pipelines which are continued in operation, an 
equivalent degree of safety shall be provided. The safety equipment 
shall be identified by the placement of a sign on the equipment stating 
that the equipment is rendered ineffective or removed from service.

[53 FR 10690, Apr. 1, 1988, as amended at 54 FR 50617, Dec. 8, 1989; 56 
FR 32100, July 15, 1991]



Sec. 250.155  Inspection requirements for DOI pipelines.

    (a) Pipeline routes shall be inspected at time intervals and methods 
prescribed by the Regional Supervisor for indication of pipeline 
leakage. The results of these inspections shall be retained for at least 
2 years and be made available to the Regional Supervisor upon request.
    (b) When pipelines are protected by rectifiers or anodes for which 
the initial life expectancy of the cathodic protection system either 
cannot be calculated or calculations indicate a life expectancy of less 
than 20 years, such pipelines shall be inspected annually by taking 
measurements of pipe-to-electrolyte potential measurements.



Sec. 250.156  Abandonment and out-of-service requirements for DOI pipelines.

    (a)(1) A pipeline may be abandoned in place if, in the opinion of 
the Regional Supervisor, it does not constitute a hazard to navigation, 
commercial fishing operations, or unduly interfere with other uses in 
the OCS. Pipelines to be abandoned in place shall be flushed, filled 
with seawater, cut, and plugged with the ends buried at least 3 feet.
    (2) Pipelines abandoned by removal shall be pigged, unless the 
Regional Supervisor determines that such procedure is not practical, and 
flushed with water prior to removal.

[[Page 336]]

    (b)(1) Pipelines taken out-of-service shall be blind flanged or 
isolated with a closed block valve at each end.
    (2) Pipelines taken out-of-service for a period of more than 1 year 
shall be flushed and filled with inhibited seawater.
    (3) Pipelines taken out-of-service shall be returned to service 
within 5 years or be abandoned in accordance with the requirements of 
paragraph (a) (1) or (2) of this section.



Sec. 250.157  Applications.

    (a) Applications for the approval of the installation of a lease 
term pipeline or for the granting of a right-of-way shall be submitted 
in quadruplicate to the Regional Supervisor and shall include the 
following:
    (1) Plat(s) drawn to a scale specified by the Regional Supervisor 
showing major features and other pertinent data including area, lease, 
and block designations; water depths; route; length in Federal waters; 
width of right-of-way, if applicable; connecting facilities; size; 
product(s) to be transported with anticipated gravity or density; burial 
depth; direction of flow; X-Y coordinates of key points; and the 
location of other pipelines that will be connected to or crossed by the 
proposed pipeline(s). The initial and terminal points of the pipeline 
and any continuation into State jurisdiction shall be accurately located 
even if the pipeline is to have an onshore terminal point. A plat(s) 
submitted for a pipeline right-of-way shall bear a signed certificate 
upon its face by the engineer who made the map that certifies that the 
right-of-way is accurately represented upon the map and that the design 
characteristics of the associated pipeline are in accordance with 
applicable regulations.
    (2) A schematic drawing showing the size, weight, grade, wall 
thickness, and type of line pipe and risers; pressure-regulating devices 
(including back-pressure regulators); sensing devices with associated 
pressure-control lines; PSV's and settings; SDV's, FSV's, and block 
valves; and manifolds. This schematic drawing shall also show input 
source(s), e.g., wells, pumps, compressors, and vessels; maximum input 
pressure(s); the rated working pressure, as specified by ANSI or API, of 
all valves, flanges, and fittings; the initial receiving equipment and 
its rated working pressure; and associated safety equipment and pig 
launchers and receivers.
    (3) General information as follows:
    (i) Description of cathodic protection system. If pipeline anodes 
are to be used, specify the type, size, weight, number, spacing, and 
anticipated life;
    (ii) Description of external pipeline coating system;
    (iii) Description of internal protective measures;
    (iv) Specific gravity of the empty pipe;
    (v) MSP;
    (vi) MAOP and calculations used in its determination;
    (vii) Hydrostatic test pressure, medium, and period of time that the 
line will be tested;
    (viii) MAOP of the receiving pipeline or facility,
    (ix) Proposed date for commencing installation and estimated time 
for construction; and
    (x) Type of protection to be afforded crossing pipelines, subsea 
valves, taps, and manifold assemblies, if applicable.
    (4) The application shall include a description of any additional 
design precautions which were taken to enable the pipeline to withstand 
the effects of water currents, storm or ice scouring, soft bottoms, 
mudslides, earthquakes, permafrost, and other environmental factors.
    (5) The application shall include a shallow hazards survey report 
and, if required by the Regional Director, an archaeological resource 
report that covers the entire length of the pipeline. A shallow hazards 
analysis may be included in a lease term pipeline application in lieu of 
the shallow hazards survey report with the approval of the Regional 
Director. The Regional Director may require the submission of the data 
upon which the report or analysis is based.
    (b) Applications to modify an approved lease term pipeline or right-
of-way grant shall be submitted in quadruplicate to the Regional 
Supervisor. These applications need only address those items in the 
original application affected by the proposed modification.

[[Page 337]]

    (c) Applications to abandon a lease term pipeline or relinquish a 
right-of-way grant shall be submitted in triplicate to the Regional 
Supervisor and shall include the following:
    (1) Reason for operation,
    (2) Proposed procedures,
    (3) ``As-built'' location plat,
    (4) Length in feet of segment to be abandoned or relinquished, and
    (5) Length in feet of segment remaining.

[53 FR 10690, Apr. 1, 1988, as amended at 59 FR 53094, Oct. 21, 1994]



Sec. 250.158  Reports.

    (a) The lessee, or right-of-way holder, shall notify the Regional 
Supervisor at least 48 hours prior to commencing the installation or 
relocation of a pipeline or conducting a pressure test on a pipeline.
    (b) The lessee or right-of-way holder shall submit a report to the 
Regional Supervisor within 90 days after completion of any pipeline 
construction. The report, submitted in triplicate, shall include an 
``as-built'' location plat drawn to a scale specified by the Regional 
Supervisor showing the location, length in Federal waters, and X-Y 
coordinates of key points; the completion date; the proposed date of 
first operation; and the HPT data. Pipeline right-of-way ``as-built'' 
location plats shall be certified by a registered engineer or land 
surveyor and show the boundaries of the right-of-way as granted. If 
there is a substantial deviation of the pipeline route as granted in the 
right-of-way, the report shall include a discussion of the reasons for 
such deviation.
    (c) The lessee or right-of-way holder shall report to the Regional 
Supervisor any pipeline taken out of service. If the period of time in 
which the pipeline is out of service is greater than 60 days, written 
confirmation is also required.
    (d) The lessee or right-of-way holder shall report to the Regional 
Supervisor when any required pipeline safety equipment is taken out of 
service for more than 12 hours. The Regional Supervisor shall be 
notified when the equipment is returned to service.
    (e) The lessee or right-of-way holder shall notify the Regional 
Supervisor prior to the repair of any pipeline or as soon as 
practicable. A detailed report of the repair of a pipeline or pipeline 
component shall be submitted to the Regional Supervisor within 30 days 
after completion of the repairs. The report shall include the following:
    (1) Description of repairs,
    (2) Results of pressure test, and
    (3) Date returned to service.
    (f) The Regional Supervisor may require that DOI pipeline failures 
be analyzed and that samples of a failed section be examined in a 
laboratory to assist in determining the cause of the failure. A 
comprehensive written report of the information obtained shall be 
submitted by the lessee to the Regional Supervisor as soon as available.
    (g) If the effects of scouring, soft bottoms, or other environmental 
factors are observed to be detrimentally affecting a pipeline, a plan of 
corrective action shall be submitted to the Regional Supervisor for 
approval within 30 days of the observation. A report of the remedial 
action taken shall be submitted to the Regional Supervisor by the lessee 
or right-of-way holder within 30 days after completion.
    (h) The results and conclusions of measurements of pipe-to-
electrolyte potential measurements taken annually on DOI pipelines in 
accordance with Sec. 250.155(b) of this part shall be submitted to the 
Regional Supervisor by the lessee before March of each year.



Sec. 250.159  General requirements for a pipeline right-of-way grant.

    (a)(1) In addition to applicable requirements of Secs. 250.150 
through 250.158 and other regulations of this part, regulations of the 
Department of Transportation, Department of the Army, and the Federal 
Energy Regulatory Commission (FERC), when a pipeline qualifies as a 
right-of-way pipeline, the pipeline shall not be installed until a 
right-of-way has been requested and granted in accordance with this 
subpart. The right-of-way grant is issued pursuant to 43 U.S.C. 1334(e) 
and may be acquired and held only by citizens and nationals of the 
United States; aliens lawfully admitted for permanent residence in the 
United States as defined in 8 U.S.C. 1101(a)(20); private,

[[Page 338]]

public, or municipal corporations organized under the laws of the United 
States or territory thereof, the District of Columbia, or of any State; 
or associations of such citizens, nationals, resident aliens, or 
private, public, or municipal corporations, States, or political 
subdivisions of States.
    (2) A right-of-way shall include the site on which the pipeline and 
associated structures are to be situated, shall not exceed 200 feet in 
width unless safety and environmental factors during construction and 
operation of the associated right-of-way pipeline require a greater 
width, and shall be limited to the area reasonably necessary for pumping 
stations or other accessory structures.
    (b)(1) When you apply for, or are the holder of, a right-of-way, you 
must:
    (i) Provide and maintain a $300,000 bond (in addition to the bond 
coverage required in part 256) that guarantees compliance with all the 
terms and conditions of the rights-of-way you hold in an OCS area; and
    (ii) Provide additional security if the Regional Director determines 
that a bond in excess of $300,000 is needed.
    (2) For the purposes of this paragraph, listed below are the four 
areas:
    (i) The Alaska OCS Region,
    (ii) The Atlantic OCS Region,
    (iii) The Gulf of Mexico OCS Region, and
    (iv) The Pacific OCS Region
    (3) If, as the result of a default, the surety on a right-of-way 
grant bond makes payment to the Government of any indebtedness under a 
grant secured by the bond, the face amount of such bond and the surety's 
liability shall be reduced by the amount of such payment.
    (4) After a default, a new bond in the amount of $300,000 shall be 
posted within 6 months or such shorter period as the Regional Supervisor 
may direct. Failure to post a new bond shall be grounds for forfeiture 
of all grants covered by the defaulted bond.
    (c) An applicant, by accepting a right-of-way grant, agrees to 
comply with the following requirements:
    (1) The right-of-way holder shall comply with applicable laws and 
regulations and the terms of the grant.
    (2) For the first calendar year, or fraction thereof, and annually 
thereafter, the right-of-way holder shall pay MMS, in advance, an annual 
rental of $15 for each statute mile, or fraction thereof, traversed by 
the right-of-way and $75 for each area to be used as a site for an 
accessory to the right-of-way pipeline including, but not limited to, a 
platform. Payments may be on an annual basis, for a 5-year period, or 
for multiples of 5 years.
    (3) The granting of the right-of-way shall be subject to the express 
condition that the rights granted shall not prevent or interfere in any 
way with the management, administration, or the granting of other rights 
by the United States, either prior or subsequent to the granting of the 
right-of-way. Moreover, the holder agrees to allow the occupancy and use 
by the United States, its lessees, or other right-of-way holders, of any 
part of the right-of-way grant not actually occupied or necessarily 
incident to its use for any necessary operations involved in the 
management, administration, or the enjoyment of such other granted 
rights.
    (4) If the right-of-way holder discovers any archaeological resource 
while conducting operations within the right-of-way, the right-of-way 
holder shall immediately halt operations within the area of the 
discovery and report the discovery to the Regional Director. If 
investigations determine that the resource is significant, the Regional 
Director will inform the lessee how to protect it.
    (5) The Regional Supervisor shall be kept informed at all times of 
the right-of-way holder's address and, if a corporation, the address of 
its principal place of business and the name and address of the officer 
or agent authorized to be served with process.
    (6) The right-of-way holder shall pay the United States or its 
lessees or right-of-way holders, as the case may be, the full value of 
all damages to the property of the United States or its said lessees or 
right-of-way holders and shall indemnify the United States against any 
and all liability for damages to life, person, or property arising from 
the occupation and use of the area covered by the right-of-way grant.

[[Page 339]]

    (7)(i) The holder of a right-of-way oil or gas pipeline shall 
transport or purchase oil or natural gas produced from submerged lands 
in the vicinity of the pipeline without discrimination and in such 
proportionate amounts as the FERC may, after a full hearing with due 
notice thereof to the interested parties, determine to be reasonable, 
taking into account, among other things, conservation and the prevention 
of waste.
    (ii) Unless otherwise exempted by FERC pursuant to 43 U.S.C. 
1334(f)(2), the holder shall--
    (A) Provide open and nondiscriminatory access to a right-of-way 
pipeline to both owner and nonowner shippers, and
    (B) Comply with the provisions of 43 U.S.C. 1334(f)(1)(B) under 
which FERC may order an expansion of the throughput capacity of a right-
of-way pipeline which is approved after September 18, 1978, and which is 
not located in the Gulf of Mexico or the Santa Barbara Channel.
    (8) The area covered by a right-of-way and all improvements thereon 
shall be kept open at all reasonable times for inspection by the 
Minerals Management Service (MMS). The right-of-way holder shall make 
available all records relative to the design, construction, operation, 
maintenance and repair, and investigations on or with regard to such 
area.
    (9) Upon relinquishment, forfeiture, or cancellation of a right-of-
way grant, the right-of-way holder shall remove all platforms, 
structures, domes over valves, pipes, taps, and valves along the right-
of-way. All of these improvements shall be removed by the holder within 
1 year of the effective date of the relinquishment, forfeiture, or 
cancellation unless this requirement is waived in writing by the 
Regional Supervisor. All such improvements not removed within the time 
provided herein shall become the property of the United States but that 
shall not relieve the holder of liability for the cost of their removal 
or for restoration of the site. Furthermore, the holder is responsible 
for accidents or damages which might occur as a result of failure to 
timely remove improvements and equipment and restore a site. An 
application for relinquishment of a right-of-way grant shall be filed in 
accordance with Sec. 250.164 of this part.
    (d) Failure to comply with the Act, regulations, or any conditions 
of the right-of-way grant prescribed by the Regional Supervisor shall be 
grounds for forfeiture of the grant in an appropriate judicial 
proceeding instituted by the United States in any U.S. District Court 
having jurisdiction in accordance with the provisions of 43 U.S.C. 1349.
    (e) Any right-of-way granted under the provisions of this subpart 
remains in effect as long as the associated pipeline is properly 
maintained and used for the purpose for which the grant was made, unless 
otherwise expressly stated in the grant. Temporary cessation or 
suspension of pipeline operations shall not cause the grant to expire. 
However, if the purpose of the grant ceases to exist or use of the 
associated pipeline is permanently discontinued for any reason, the 
grant shall be deemed to have expired.

[53 FR 10690, Apr. 1, 1988, as amended at 54 FR 50617, Dec. 8, 1989; 55 
FR 47753, Nov. 15, 1990; 59 FR 53094, Oct. 21, 1994; 62 FR 27955, May 
22, 1997]

    Effective Date Note: At 62 FR 27955, May 22, 1997, Sec. 250.159 was 
amended by revising paragraph (b)(1), effective Aug. 20, 1997. For the 
convenience of the user, the superseded text is set forth as follows:

Sec. 250.159  General requirements for a pipeline right-of-way grant.

                                * * * * *

    (b)(1) The applicant shall furnish the Regional Supervisor a 
corporate surety bond in the sum of $300,000 conditioned on compliance 
with all the terms of the grant. Such bond shall not be required if the 
applicant already maintains or furnishes a bond in the sum of $300,000 
conditioned on compliance with the terms of all right-of-way grants held 
by the applicant in the OCS for the area in which the grant to be issued 
is situated. This bond shall be in addition to any bond required of a 
lessee in 30 CFR Part 256.

                                * * * * *



Sec. 250.160  Applications for a pipeline right-of-way grant.

    (a) An application for a new or modified pipeline right-of-way grant 
shall

[[Page 340]]

be submitted in quadruplicate to the Regional Supervisor. It shall 
address those items required by Sec. 250.157 (a) or (b) of this part, as 
applicable. It shall also state the primary purpose for which the right-
of-way is to be used. If the right-of-way has been utilized prior to the 
time the application is made, the application shall state the date such 
utilization commenced, by whom, and the date the applicant obtained 
control of the improvement. A nonrefundable filing fee of $1,400 and the 
rental required under Sec. 250.159(c)(2) of this part shall accompany a 
new right-of-way application. An application to modify an approved 
right-of-way grant shall be accompanied by the additional rental 
required under Sec. 250.159(c)(2), if applicable. A separate application 
shall be filed for each right-of-way.
    (b)(1) An individual applicant shall submit a statement of 
citizenship or nationality with the application. An applicant who is an 
alien lawfully admitted for permanent residence in the United States 
shall also submit evidence of such status with the application.
    (2) If the applicant is an association (including a partnership), 
the application shall also be accompanied by a certified copy of the 
articles of association or appropriate reference to a copy of such 
articles already filed with MMS and a statement as to any subsequent 
amendments.
    (3) If the applicant is a corporation, the application shall also 
include the following:
    (i) A statement certified by the Secretary or Assistant Secretary of 
the corporation with the corporate seal showing the State in which it is 
incorporated and the name of the person(s) authorized to act on behalf 
of the corporation, or
    (ii) In lieu of such a statement, an appropriate reference to 
statements or records previously submitted to MMS (including material 
submitted in compliance with prior regulations).
    (c) The application shall include a list of every lessee and right-
of-way holder whose lease or right-of-way is intersected by the proposed 
right-of-way. The application shall also include a statement that a copy 
of the application has been sent by registered or certified mail to each 
such lessee or right-of-way holder.
    (d) The applicant shall include in the application an original and 
three copies of a completed Nondiscrimination in Employment form (YN 
3341-1 dated July 1982). These forms are available at each MMS regional 
office.



Sec. 250.161  Granting a pipeline right-of-way.

    (a) In considering an application for a right-of-way, the Regional 
Supervisor shall consider the potential effect of the associated 
pipeline on the human, marine, and coastal environments, life (including 
aquatic life), property, and mineral resources in the entire area during 
construction and operational phases. The Regional Supervisor shall 
prepare an environmental analysis in accordance with applicable policies 
and guidelines. To aid in the evaluation and determinations, the 
Regional Supervisor may request and consider views and recommendations 
of appropriate Federal Agencies, hold public meetings after appropriate 
notice, and consult, as appropriate, with State agencies, organizations, 
industries, and individuals. Before granting a pipeline right-of-way, 
the Regional Supervisor shall give consideration to any recommendation 
by the intergovernmental planning program, or similar process, for the 
assessment and management of OCS oil and gas transportation.
    (b) Should the proposed route of a right-of-way adjoin and 
subsequently cross any State submerged lands, the applicant shall submit 
evidence to the Regional Supervisor that the State(s) so affected has 
reviewed the application. The applicant shall also submit any comment 
received as a result of that review. In the event of a State 
recommendation to relocate the proposed route, the Regional Supervisor 
may consult with the appropriate State officials.
    (c)(1) The applicant shall submit photocopies of return receipts to 
the Regional Supervisor that indicate the date that each lessee or 
right-of-way holder referenced in Sec. 250.160(c) of this part has 
received a copy of the application. Letters of no objection may be

[[Page 341]]

submitted in lieu of the return receipts.
    (2) The Regional Supervisor shall not take final action on a right-
of-way application until the Regional Supervisor is satisfied that each 
such lessee or right-of-way holder has been afforded at least 30 days 
from the date determined in paragraph (c)(1) of this section in which to 
submit comments.
    (d) If a proposed right-of-way crosses any lands not subject to 
disposition by mineral leasing or restricted from oil and gas 
activities, it shall be rejected by the Regional Supervisor unless the 
Federal Agency with jurisdiction over such excluded or restricted area 
gives its consent to the granting of the right-of-way. In such case, the 
applicant, upon a request filed within 30 days after receipt of the 
notification of such rejection, shall be allowed an opportunity to 
eliminate the conflict.
    (e)(1) If the application and other required information are found 
to be in compliance with applicable laws and regulations, the right-of-
way may be granted. The Regional Supervisor may prescribe, as conditions 
to the right-of-way grant, stipulations necessary to protect human, 
marine, and coastal environments, life (including aquatic life), 
property, and mineral resources located on or adjacent to the right-of-
way.
    (2) If the Regional Supervisor determines that a change in the 
application should be made, the Regional Supervisor shall notify the 
applicant that an amended application shall be filed subject to 
stipulated changes. The Regional Supervisor shall determine whether the 
applicant shall deliver copies of the amended application to other 
parties for comment.
    (3) A decision to reject an application shall be in writing and 
shall state the reasons for the rejection.

[53 FR 10690, Apr. 1, 1988, as amended at 54 FR 50617, Dec. 8, 1988]



Sec. 250.162  Requirements for construction under a right-of-way grant.

    (a) Failure to construct the associated right-of-way pipeline within 
5 years of the date of the granting of a right-of-way shall cause the 
grant to expire.
    (b)(1) A right-of-way holder shall ensure that the right-of-way 
pipeline is constructed in a manner that minimizes deviations from the 
right-of-way as granted.
    (2) If, after constructing the right-of-way pipeline, it is 
determined that a deviation from the proposed right-of-way as granted 
has occurred, the right-of-way holder shall--
    (i) Notify the operators of all leases and holders of all right-of-
way grants in which a deviation has occurred, and within 60 days of the 
date of the acceptance by the Regional Supervisor of the completion of 
pipeline construction report, provide the Regional Supervisor with 
evidence of such notification; and
    (ii) Relinquish any unused portion of the right-of-way.
    (3) Substantial deviation of a right-of-way pipeline as constructed 
from the proposed right-of-way as granted may be grounds for forfeiture 
of the right-of-way.
    (c) If the Regional Supervisor determines that a significant change 
in conditions has occurred subsequent to the granting of a right-of-way 
but prior to the commencement of construction of the associated 
pipeline, the Regional Supervisor may suspend or temporarily prohibit 
the commencement of construction until the right-of-way grant is 
modified to the extent necessary to address the changed conditions.



Sec. 250.163  Assignment of a right-of-way grant.

    (a) Assignment may be made of a right-of-way grant, in whole or of 
any lineal segment thereof, subject to the approval of the Regional 
Supervisor. An application for approval of an assignment of a right-of-
way or of a lineal segment thereof, shall be filed in triplicate with 
the Regional Supervisor.
    (b) Any application for approval for an assignment, in whole or in 
part, of any right, title, or interest in a right-of-way grant shall be 
accompanied by the same showing of qualifications of the assignees as is 
required of an applicant for a right-of-way in Sec. 250.160 of this 
subpart and shall be supported by a statement that the assignee agrees 
to comply with and to be bound by the terms and conditions of the right-
of-

[[Page 342]]

way grant. The assignee shall satisfy the bonding requirements in 
Sec. 250.159(b) of this part. No transfer shall be recognized unless and 
until it is first approved, in writing, by the Regional Supervisor. A 
non refundable filing fee of $50 shall accompany the application for the 
approval of an assignment.



Sec. 250.164  Relinquishment of a right-of-way grant.

    A right-of-way grant or a portion thereof may be surrendered by the 
holder by filing a written relinquishment in triplicate with the 
Regional Supervisor. It shall contain those items addressed in 
Sec. 250.157(c) of this part. A relinquishment shall take effect on the 
date it is filed subject to the satisfaction of all outstanding debts, 
fees, or fines and the requirements in Sec. 250.159(c)(9) of this part.



                 Subpart K--Oil and Gas Production Rates



Sec. 250.170  Definitions for production rates.

    Terms used in this subpart shall have meanings given below:
    Enhanced recovery operations means pressure maintenance operations, 
secondary and tertiary recovery, cycling, and similar recovery 
operations which alter the natural forces in a reservoir to increase the 
ultimate recovery of oil or gas.
    Gas reservoir means a reservoir that contains hydrocarbons 
predominantly in a gaseous (single-phase) state.
    Gas-well completion means a well completed in a gas reservoir or in 
the gas cap of an oil reservoir with an associated gas cap.
    Maximum Efficient Rate (MER) means the maximum sustainable daily oil 
or gas withdrawal rate from a reservoir which will permit economic 
development and depletion of that reservoir without detriment to 
ultimate recovery.
    Maximum Production Rate (MPR) means the approved maximum daily rate 
at which oil or gas may be produced from a specified oil-well or gas-
well completion.
    Nonsensitive reservoir means a reservoir in which ultimate recovery 
is not decreased by high reservoir production rates.
    Oil reservoir means a reservoir that contains hydrocarbons 
predominantly in a liquid (single-phase) state.
    Oil reservoir with an associated gas cap means a reservoir that 
contains hydrocarbons in both a liquid and gaseous (two-phase) state.
    Oil-well completion means a well completed in an oil reservoir or in 
the oil accumulation of an oil reservoir with an associated gas cap.
    Sensitive reservoir means a reservoir in which ultimate recovery is 
decreased by high reservoir production rates. A high reservoir 
production rate is one which exceeds the MER.
    Waste of oil and gas means: (1) The physical waste of oil and gas; 
(2) the inefficient, excessive, or improper use of, or the unnecessary 
dissipation of reservoir energy; (3) the locating, spacing, drilling, 
equipping, operating, or producing of any oil or gas well(s) in a manner 
which causes or tends to cause a reduction in the quantity of oil or gas 
ultimately recoverable from a pool under prudent and proper operations 
or which causes or tends to cause unnecessary or excessive surface loss 
or destruction of oil or gas; or (4) the inefficient storage of oil.



Sec. 250.171  General requirements and classification of reservoirs.

    (a) Wells and reservoirs shall be produced at rates that will 
provide economic development and depletion of the hydrocarbon resources 
in a manner that would maximize the ultimate recovery without adversely 
affecting correlative rights.
    (b) For directionally drilled wells in which the completed interval 
is closer than 500 feet from a unit or lease line or for vertically 
drilled wells in which the surface location is closer than 500 feet from 
a unit or lease line, for which the unit, lease, or royalty interests 
are not the same, the prior approval by the Regional Supervisor is 
required before production is commenced. An operator requesting such an 
approval shall furnish the Regional Supervisor with letters expressing 
acceptance or objection from operators of offset properties.

[[Page 343]]

    (c) The lessee shall propose a classification for each reservoir as 
an oil reservoir, an oil reservoir with an associated gas cap or a gas 
reservoir, and as sensitive or nonsensitive.
    (d) All oil reservoirs with associated gas caps shall be initially 
classified as sensitive and shall require establishing a maximum 
efficient production rate and balancing of production in accordance with 
Sec. 250.172(a) (1) and (5) of this part. All other oil reservoirs and 
all gas reservoirs shall be initially classified as nonsensitive.
    (e) A reservoir may be reclassified by the Minerals Management 
Service (MMS) as to type and sensitivity at any time during its 
productive life when information becomes available showing that 
reclassification is warranted.



Sec. 250.172  Oil and gas production rates.

    (a) MER. (1) The lessee shall submit a proposed MER for each 
producing sensitive reservoir on Form MMS-127, Request for Reservoir 
Maximum Efficient Rate (MER), along with appropriate supporting 
information to the Regional Supervisor within 45 days after discovering 
that a reservoir is sensitive.
    (2) The lessee may propose to revise an MER by submitting Form MMS-
127 with appropriate supporting information.
    (3) The effective date of an MER for a reservoir or revision thereof 
shall be the first day of the month in which Form MMS-127 is submitted.
    (4) When approved, the MER shall not be exceeded, except as provided 
in paragraph (a)(5) of this section.
    (5) If a reservoir is produced at a rate in excess of the MER for 
any month, the lessee should initiate measures necessary to balance 
production (offset overproduction by underproduction) during the next 
succeeding month. All overproduction shall be balanced by the end of the 
next succeeding calendar quarter following the quarter in which the 
overproduction occurred. Any operation in an overproduction status in 
any reservoir for two successive calendar quarters shall be shut in from 
that reservoir until the actual production is equal to that which would 
have occurred under the approved MER, unless an alternative plan is 
approved by the Regional Supervisor.
    (6) The lessee shall review the MER for each producing sensitive 
reservoir at least once a year and submit Form MMS-127 with appropriate 
supporting information.
    (7) The lessee may request the reclassification of a reservoir from 
sensitive to nonsensitive and request approval for termination of an MER 
by submitting Form MMS-127 with information supporting the 
reclassification and termination.
    (8) At the request of the Regional Supervisor, the lessee shall 
furnish the information specified on Form MMS-127 for any producing 
nonsensitive reservoir.
    (9) Public information copies of Form MMS-127 shall be submitted in 
accordance with Sec. 250.17.
    (b) MPR. (1) The lessee shall propose an MPR for each producing well 
completion together with full information on the method used in its 
determination. The MPR shall be based on well tests and any limitations 
imposed by well and surface equipment, sand production, gas-oil and 
water-oil ratios, location of perforated intervals, and prudent 
operating practices. The sum of the MPR's of wells completed in a 
sensitive reservoir shall not exceed the approved MER.
    (2) The lessee shall conduct a well-flow potential test within 30 
days of the date of first continuous production on all new, recompleted, 
and reworked well completions. Within 15 days after the end of the test 
period, the lessee shall submit a proposed MPR with well potential test 
for the individual well completion on Form MMS-126, Well Potential Test 
Report and Request for Maximum Production Rate (MPR). The initial MPR 
shall not exceed 110 percent of the test rate submitted and shall be 
effective on the first day of the month following the end of the test 
period if approved by the Regional Supervisor. During the 30-day period 
allowed for testing, the lessee may produce a new, recompleted, or 
reworked completion at rates necessary to establish the MPR. After the 
30-day period and prior to approval of the initial MPR, a well 
completion may be produced at a rate not to exceed the proposed rate. 
The

[[Page 344]]

lessee shall report the total production obtained during the test period 
and shall identify all other wells completed in the reservoir on Form 
MMS-126.
    (3) At least one well test shall be conducted during a calendar half 
for producing oil-well and gas-well completions and results submitted on 
Form MMS-128, Semiannual Well Test Report. Well tests shall be submitted 
within 45 days of the day the test was conducted.
    (4) Unless otherwise ordered by the Regional Supervisor, a revised 
MPR shall automatically be approved for each well completion for each 
well test submitted equal to 110 percent of the test rate. The revised 
MPR will be effective on the first day of the month following the date 
the well test was conducted. Prior to the approval of a proposed 
increase of the MPR, a well completion may be produced at a rate not to 
exceed the proposed increased rate.
    (5) When a well test is not submitted during a calendar half for a 
producing oil-well or gas-well completion, the MPR will be automatically 
canceled effective on the first day of the appropriate following 
calendar half.
    (6) When the results of a semiannual well test for an oil-well or 
gas-well completion cannot be submitted within the specified time, the 
lessee shall request an extension of time for submitting those test 
results. The extension must be approved in advance by the Regional 
Supervisor to continue production under the last approved MPR.
    (7) When approved by the Regional Supervisor, an MPR shall not be 
exceeded, except as provided in paragraphs (b)(4) and (c) of this 
section.
    (8) Public Information copies of Form MMS-126 shall be submitted in 
accordance with Sec. 250.17.
    (9) Public information copies of Form MMS-128 shall be submitted in 
accordance with Sec. 250.17.
    (c) Temporary rates. Temporary production rates resulting from 
normal variations and fluctuations exceeding a well MPR or reservoir MER 
shall not be considered a violation, provided that such production in 
excess of an approved MER is balanced by production in accordance with 
the provisions of paragraph (a)(5) of this section.

[53 FR 10690, Apr. 1, 1988, as amended at 58 FR 49928, Sept. 24, 1993]



Sec. 250.173  Well production testing.

    (a) The required well testing shall be conducted for a period of not 
less than four consecutive hours. Immediately prior to the 4-hour test 
period, the well completion shall have produced under stabilized 
conditions for a period of not less than six consecutive hours. The 6-
hour pretest period shall not begin until after the recovery of a volume 
of fluid equivalent to the amount of fluids introduced into the 
formation during completion, recompletion, reworking, or treatment 
operations. Measured gas volumes shall be adjusted to the standard 
conditions of 14.73 pounds per square inch absolute (psia) (15.025 psia 
in the Gulf of Mexico OCS Region) and 60  deg.F for all tests. When 
orifice meters are used, a specific gravity for the gas shall be 
obtained or estimated, and a specific gravity-correction factor shall be 
applied to the orifice coefficient. The Regional Supervisor may require 
a prolonged test or retest of a well completion if the test is 
determined to be necessary for the establishment of a well MPR or a 
reservoir MER. The Regional Supervisor may approve test periods of less 
than 4 hours and pretest stabilization periods of less than 6 hours for 
well completions provided that test reliability can be demonstrated 
under such procedures.
    (b) At the request of the Regional Supervisor, the lessee shall 
conduct a multipoint back-pressure test to determine the theoretical 
open-flow potential of a gas well. The test shall be conducted within 30 
days of the Regional Supervisor's request or within the time period 
specified by the Regional Supervisor.
    (c) An MMS representative may witness any well test of oil-well and 
gas-well completions. Upon request, a lessee shall provide advance 
notice to the Regional Supervisor of the time and date of well tests.

[[Page 345]]



Sec. 250.174  Bottomhole pressure survey.

    (a) For each new reservoir, the lessee shall conduct a static 
bottomhole pressure survey within 3 months after the date of first 
continuous production.
    (b) For each producing reservoir with three or more producing 
completions, the lessee shall conduct annual static bottomhole pressure 
surveys in a sufficient number of key wells to establish an average 
reservoir pressure. The Regional Supervisor may require that a survey be 
performed on specific wells.
    (c) The results of all static bottomhole pressure surveys obtained 
by the lessee shall be filed with the Regional Supervisor within 60 days 
after the date of the survey.



Sec. 250.175  Flaring or venting gas and burning liquid hydrocarbons.

    (a) Lessees may flare or vent oil-well gas or gas-well gas without 
receiving prior approval from the Regional Supervisor only in the 
following situations:
    (1) When gas vapors are flared or vented in small volumes from 
storage vessels or other low-pressure production vessels and cannot be 
economically recovered.
    (2) During an equipment failure or to relieve system pressures. The 
lessee must comply with the following conditions:
    (i) Lessees must not flare or vent oil-well gas for more than 48 
continuous hours unless the Regional Supervisor approves. The Regional 
Supervisor may specify a limit of less than 48 hours to prevent air 
quality degradation.
    (ii) Lessees must not flare or vent gas from a facility for more 
than 144 cumulative hours during any calendar month unless the Regional 
Supervisor approves.
    (iii) Lessees must not flare or vent gas-well gas beyond the time 
required to eliminate an emergency unless the Regional Supervisor 
approves.
    (3) During the unloading or cleaning of a well, drill-stem testing, 
production testing, or other well-evaluation testing. Flaring or venting 
must not exceed 48 cumulative hours per testing operation on a single 
completion. The Regional Supervisor may allow less time to prevent air 
quality degradation or more time if lessees need additional time to 
evaluate reservoir parameters.
    (b) Lessees may flare or vent oil-well gas for up to 1 year when the 
Regional Supervisor approves the request for one of the following 
reasons:
    (1) The lessee initiated an action which, when completed, will 
eliminate flaring and venting; or
    (2) The lessee submitted an evaluation supported by engineering, 
geologic, and economic data indicating that either:
    (i) The oil and gas produced from the well(s) will not economically 
support the facilities necessary to save and/or sell the gas; or
    (ii) There is not enough gas to market.
    (c) Lessees may burn produced liquid hydrocarbons only if the 
Regional Supervisor approves. To burn produced liquid hydrocarbons, the 
lessee must demonstrate that the amounts to burn would be minimal, or 
that the alternatives are infeasible or pose a significant risk that may 
harm offshore personnel or the environment. Alternatives to burning 
liquid hydrocarbons include transporting the liquids or storing and re-
injecting them into a producible zone.
    (d) Lessees must prepare records detailing gas flaring or venting 
and liquid hydrocarbon burning for each facility. The records must 
include, at a minimum:
    (1) Daily volumes of gas flared or vented and liquid hydrocarbons 
burned;
    (2) Number of hours of flaring, venting, or burning on a daily 
basis;
    (3) Reasons for flaring, venting, or burning; and
    (4) A list of the wells contributing to flaring, venting, or 
burning, along with the gas-oil ratio data.
    (e) Lessees must keep these records for at least 2 years. Lessees 
must allow Minerals Management Service representatives to inspect the 
records at the lessees' field office that is nearest the Outer 
Continental Shelf facility, or at another location agreed to by the 
Regional Supervisor. If the Regional Supervisor requests to see the 
records, lessees must provide a copy.
    (f) Requirements for flaring and venting of gas containing 
H2S--(1) Flaring of gas

[[Page 346]]

containing H2S. (i) The Regional Supervisor may, for safety 
or air pollution prevention purposes, further restrict the flaring of 
gas containing H2S. The Regional Supervisor will use 
information provided in the lessee's H2S Contingency Plan 
(Sec. 250.67(f)), Exploration Plan or Development and Production Plan, 
and associated documents in determining the need for such restrictions.
    (ii) If the Regional Supervisor determines that flaring at a 
facility or group of facilities may significantly affect the air quality 
of an onshore area, the Regional Supervisor may require the operator(s) 
to conduct an air quality modeling analysis to determine the potential 
effect of facility emissions on onshore ambient concentrations of 
SO2. The Regional Supervisor may require monitoring and 
reporting or may restrict or prohibit flaring pursuant to Secs. 250.45 
and 250.46.
    (2) Venting of gas containing H2S. You must not vent gas 
containing H2S except for minor releases during maintenance 
and repair activities that do not result in a 15-minute time weighted 
average atmospheric concentration of H2S of 20 ppm or higher 
anywhere on the platform.
    (3) Reporting flared gas containing H2S. In addition to 
the recordkeeping requirements of paragraphs (d) and (e) of this 
section, when required by the Regional Supervisor, the operator must 
submit to the Regional Supervisor a monthly report of flared and vented 
gas containing H2S. The report must contain the following 
information:
    (i) On a daily basis, the volume and duration of each flaring 
episode;
    (ii) H2S concentration in the flared gas; and
    (iii) Calculated amount of SO2 emitted.

[61 FR 25148, May 20, 1996, as amended at 62 FR 3800, Jan. 27, 1997]



Sec. 250.176  Downhole commingling.

    (a) An application to commingle hydrocarbons produced from multiple 
reservoirs within a common wellbore shall be submitted to the Regional 
Supervisor for approval and shall include all pertinent well 
information, geologic and reservoir engineering data, and a schematic 
diagram of well equipment. The application shall provide the estimated 
recoverable reserves as well as any available alternate drainage points 
which might be used to produce the reservoirs separately.
    (b) For a competitive reservoir, notice of intent to submit the 
application shall be sent by the applicant to all other lessees having 
an interest in the reservoir prior to submitting the application to the 
Regional Supervisor.
    (c) The application shall specify the well-completion number to be 
used for subsequent reporting purposes.



Sec. 250.177  Enhanced oil and gas recovery operations.

    (a) The lessee shall timely initiate enhanced oil and gas recovery 
operations for all competitive and noncompetitive reservoirs where such 
operations would result in an increased ultimate recovery of oil or gas 
under sound engineering and economic principles.
    (b) A proposed plan for pressure maintenance, secondary and tertiary 
recovery, cycling, and similar recovery operations to increase the 
ultimate recovery of oil and/or gas from a reservoir shall be submitted 
to the Regional Supervisor for approval before such operations are 
initiated.
    (c) Periodic reports of the volumes of oil, gas, or other substances 
injected, produced, or reproduced shall be submitted as required by the 
Regional Supervisor.



Subpart L--Oil and Gas Production Measurement, Surface Commingling, and 
                                Security



Sec. 250.180  Measurement of liquid hydrocarbons.

    (a) General. Measurement equipment shall be designed, installed, 
used, maintained, and tested so as to accurately and completely measure 
the liquid hydrocarbons produced on a lease for purposes of royalty 
determination. For purposes of this subpart, a liquid hydrocarbon is a 
mixture of hydrocarbons produced in liquid form after passing through 
surface separating facilities which is marketed or used as such.
    (b) Application and approval. The lessee shall not commence 
production of

[[Page 347]]

liquid hydrocarbons unless the Regional Supervisor has approved an 
application for the measurement of liquid hydrocarbons and for 
commingling, if applicable. The application shall contain information 
sufficient to demonstrate that the requirements of this section will be 
met. Sales meter facilities shall be appropriately located with respect 
to the lease(s) and transportation system(s) involved.
    (c) Sales meter facility requirements. (1) A meter upon which 
royalty is based shall be considered a sales meter.
    (2) Sales meter facilities shall include the following components 
which shall be compatible with the systems to which they are connected:
    (i) A positive-displacement or other meter approved by the Regional 
Supervisor. The meter shall be equipped with a nonreset totalizer.
    (ii) A calibrated prover tank, a master meter, a mechanical 
displacement prover, or other device permanent or portable capable of 
proving the meter approved by the Regional Supervisor.
    (iii) A proportional-to-flow sampling device which is pulsed by the 
meter output.
    (iv) A temperature measurement or temperature compensation device.
    (3) Sales meter facilities shall be designed to accomplish the 
following:
    (i) Prevent reversal of flow through the meter;
    (ii) Adequately protect meters subjected to pressure pulsation or 
surges by the use of surge tanks, expansion chambers, or similar 
devices;
    (iii) Prevent the meter from being subjected to shock pressures 
which are greater than the maximum working pressure; and
    (iv) Prevent bypassing of the meter.
    (4) Sales meter facilities shall be maintained to ensure the 
following:
    (i) Meters are operated within the gravity range specified by the 
manufacturer;
    (ii) Meters are operated within the manufacturer's specifications 
for maximum and minimum flow rate for linear accuracy; and
    (iii) Meters are reproven when changes in metering conditions affect 
the meters performance such as changes in pressure, temperature, density 
(water content), viscosity, pressure, and flow rate.
    (5) The required sampling device shall conform to the following:
    (i) The sampling device shall be installed such that the sampling 
point is in the flowstream immediately upstream or downstream of the 
meter or divert valve,
    (ii) The sample container for the sampling device shall be vapor-
tight and include a mixing device to permit complete mixing of the 
sample prior to removal from the container, and
    (iii) The sampling device is installed such that the sample probe is 
in the center of the flow piping in a vertical run and is located at 
least three pipe diameters downstream of any pipe fitting within a 
region of turbulent flow.
    (6) When obtaining net standard volume and associated measurement 
parameters, the lessee shall use procedures and correction factors in 
accordance with the following chapters of the API Manual of Petroleum 
Measurement Standards (MPMS):
    (i) Chapters 4.1 through 4.7, Proving Systems;
    (ii) Chapters 5.1 through 5.5, Metering;
    (iii)(A) Chapter 6.1, LACT System;
    (B) Chapter 6.6, Pipeline Metering Systems;
    (C) Chapter 6.7, Metering Viscous Hydrocarbons;
    (iv)(A) Chapter 7.2, Dynamic Temperature Determination;
    (B) Chapter 7.3, Static Temperature Determination Using Portable 
Electronic Thermometers.
    (v) Chapters 8.1 and 8.2, Sampling;
    (vi)(A) Chapter 9.1, Hydrometer Test Method for Density, Relative 
Density (Specific Gravity), or API Gravity of Crude Petroleum and Liquid 
Petroleum Products;
    (B) Chapter 9.2, Pressure Hydrometer Test Method for Density or 
Relative Density;
    (vii)(A) Chapter 10.1, Determination of Sediment in Crude Oils and 
Fuel Oils by the Extraction Method;
    (B) Chapter10.2, Determination of Water in Crude Oil by 
Distillation;
    (C) Chapter 10.3, Determination of Water and Sediment in Crude Oil 
by the Centrifuge Method (Laboratory Procedure);

[[Page 348]]

    (D) Chapter 10.4, (Publication 2542) Methods of Test for Water and 
Sediment in Crude Oils;
    (viii) (A) Chapter 11.1, Volume 1, Table 5A--Generalized Crude Oils 
and JP-4, Correction of Observed API Gravity to API Gravity at 60 deg.F 
and Table 6A--Generalized Crude Oils and JP-4, Correction of Volume to 
60 deg.F Against API Gravity at 60 deg.F;
    (B) Chapter 11.2.1, Compressibility Factors for Hydrocarbons: 0-90  
deg. API Gravity Range;
    (C) Chapter 11.2.2, Compressibility Factors for Hydrocarbons: 0.350-
0.637 Relative Density Range (60 deg.F/60 deg.F) and -50 deg.F to 
140 deg.F Meeting Temperature;
    (ix) Chapter 12.2, Calculation of Liquid Petroleum Quantities 
Measured by Turbine or Displacement Meters.
    (7) All run tickets pulled and/or completed during a particular 
month shall be sent to the Regional Supervisor, within 15 days following 
the end of the month and shall clearly identify all observed data, all 
correction factors not included in the meter factor, the net standard 
volume, and all calculations and factors utilized.
    (d) Sales meter provings. Sales meters for liquid hydrocarbons shall 
be proved and calibrated in accordance with the following requirements:
    (1) The Minerals Management Service (MMS) representatives shall be 
permitted to witness regularly scheduled provings or any proving 
requested by the Regional Supervisor.
    (2) The integrity of the calibration of each mechanical displacement 
prover, prover tank, master meter, or other type of prover shall be 
traceable to test measures which have been certified by the National 
Bureau of Standards.
    (3) Master meters, mechanical-displacement provers, and prover tanks 
shall be calibrated in accordance with the following requirements:
    (i) The master meter shall be calibrated to obtain a master meter 
factor before using the master meter to establish an operating meter 
factor. The master meter shall be calibrated with a fluid of similar 
gravity, viscosity, and temperature as flows through the operating meter 
and with a similar flow rate. This calibration shall be conducted 
monthly but the time between calibration shall not exceed 6 weeks unless 
a longer period of time is approved by the Regional Supervisor.
    (ii) The lessee shall calibrate a master meter by conducting and 
recording runs until the results of two consecutive runs, if a prover 
tank is used, or five out of six consecutive runs, if a mechanical-
displacement prover is used, produce results such that the greatest 
difference in the meter factors between the runs is not greater than 
0.0002. The average of the two or the five runs which produced the 
acceptable results shall be used to compute the master meter factor.
    (iii) The master meter may be installed either upstream or 
downstream of the operating meter but shall be upstream of any back-
pressure or reverse flow check valves associated with the operating 
meter.
    (iv) Mechanical-displacement provers and prover tanks shall be 
calibrated at least every 5 years in accordance with the API MPMS, 
Chapters 4.1 through 4.7 and 11.2.3. A copy of each calibration report 
shall be submitted to the Regional Supervisor within 15 days following 
calibration.
    (v) When calibrating meters with a mechanical-displacement prover, 
prover tank, or master meter, the following appropriate correction 
factors shall be taken into account:
    (A) The change in prover volume due to pressure in the steel pipe 
(Cps) using API MPMS, Chapter 12, Section 2, Appendix A, Table A-3, 
Pressure Correction Factors for Steel, Cps;
    (B) The change in volume of the test liquid with the change in 
temperature (Ctl) using APIMPMS, Chapter 11.1, Volume I, Table 6A, 
Generalized Crude Oils and JP-4, Correction of Volume to 60 deg.F 
Against API Gravity at 60 deg.F;
    (C) The change in prover volume due to the change in temperature 
(Cts) using API MPMS, Chapter 12, Section 2, Appendix A, Table A-1, 
Temperature Correction Factors of Mild Steel, and Table A-2, Temperature 
Correction Factors for Stainless Steel; and
    (D) The change in volume of the test liquid with the change in 
pressure (Cpl) using chapter 11.2.1 or 11.2.2, API MPMS, as appropriate.

[[Page 349]]

    (4) Each operating sales meter shall be proved to determine the 
meter factor each month, however, the time between meter factor 
determinations is not to exceed 42 days. Meter provings shall be in 
accordance with the following:
    (i) When establishing an operating meter factor with a prover tank, 
proof runs shall be made and recorded until two consecutive runs produce 
results such that the difference between results is not greater than .05 
percent of the prover tank volume. The average of the results of these 
two runs shall be used to compute the meter factor.
    (ii) When establishing an operating meter factor with a master 
meter, proof runs shall be made until three consecutive runs produce 
results such that the difference in the meter factor between all runs is 
not greater than 0.0005. The volume of each of these runs shall be at 
least 10 percent of the hourly rated capacity of the operating meter and 
shall be of sufficient amount for the determination of an accurate 
operating meter factor. The average of the results of these three runs 
shall be used to compute the meter factor.
    (iii) When establishing an operating meter factor with a mechanical-
displacement prover, proof runs shall be made and recorded until five 
out of six consecutive runs produce results such that the difference 
between results is not greater than 0.0005. The average of the results 
of the five runs shall be used to compute the meter factor.
    (5) The lessee shall submit copies of all meter proving reports for 
sales meters and master meters to the Regional Supervisor monthly within 
15 days following the end of the month. Meter factors which are 
determined to be in tolerance shall be applied from the date of proving.
    (i) A meter factor is considered a malfunction factor when the 
deviation between the factor and the previous factor exceeds 0.0025. In 
the event of such a malfunction, the meter shall be immediately removed 
from service, checked for damage or wear, adjusted and/or repaired, and 
reproven prior to return to service. The arithmetic average of the 
malfunction factor and the previous factor shall be applied to the 
production measured through the meter between the date of the previous 
factor and the date of the malfunction factor. Malfunction meter factors 
shall be clearly indicated on the proving report which shall also 
contain all appropriate remarks regarding subsequent repairs and/or 
adjustments.
    (ii) When a malfunction results in the failure of the meter to 
register production, the meter shall be immediately removed from 
service, repaired, and reproven prior to returning it to service. The 
previous meter factor shall be applied to the production run between the 
date of that factor and the date of the failure. Any unregistered 
production shall be estimated by the best possible means and shall be 
reported as estimated production.
    (iii) When the results of a sales meter proving exceed the 
repeatability (run tolerance) criteria and all measures excluding the 
adjustment and/or repair of the meter and meter components cannot bring 
results to within tolerance (failure to obtain repeatability of runs), a 
factor shall be established using proving results made prior to any 
adjustment and/or repair of the meter and meter components. The 
established factor shall be considered a malfunction factor and treated 
in accordance with paragraph (d)(5)(i) of this section.
    (6) To correct gross volumes metered under nonstandard conditions 
(standard conditions are 0 pounds per square inch gauge (psig) and 60  
deg.F), Cpl factors shall be calculated into the meter factor or listed 
on the appropriate run ticket. The Ctl factors shall be listed on the 
appropriate run ticket when the meter is not automatically temperature 
compensated.
    (7) Run tickets shall be pulled at the time of any proving which is 
conducted for the purpose of establishing a monthly meter factor or 
which results in the establishment of a malfunction meter factor. A copy 
of the subject run ticket shall be submitted in accordance with 
Sec. 250.180(c)(7) of this part.
    (e) Allocation meter facility requirements. (1) For purposes of this 
subpart, an allocation meter is a meter whose volume measurement is used 
to substantiate which portion of the volume measured by a royalty meter 
is attributable to a particular lease, measurement point, or well. 
Allocation meter

[[Page 350]]

facilities shall include a meter, provisions for use of a device capable 
of proving the allocation meter, and equipment for continuous or daily 
sampling. Samples shall be taken continuously or daily.
    (2)(i) Allocation meters measuring 50 barrels of oil per day or more 
shall be proven monthly, and
    (ii) Allocation meters measuring less than 50 barrels of oil per day 
shall be proven quarterly.
    (3) A copy of allocation meter proving reports must be kept at the 
field location for a period of 2 years.
    (4) If an allocation meter proving results in a meter factor which 
differs from the previous meter factor by an amount greater than 0.02 
and less than 0.07, the allocation meter shall be adjusted and reproven 
prior to return to service.
    (5) If an allocation meter proving results in a meter factor which 
differs from the previous meter factor by an amount equal to or greater 
than 0.07, the allocation meter shall be repaired and reproven prior to 
return to service.
    (f) Sales tank requirements. (1) Sales tank facilities designated by 
the Regional Supervisor as a sales location on which royalty shall be 
based, shall be equipped with a vapor-tight thief hatch and vent-line 
valve and a fill line designed to minimize free fall and splashing.
    (2) A complete set of calibration charts (tank tables) shall be 
submitted to the Regional Supervisor prior to use of the tank for sales 
measurement purposes. The volume and other measurement parameters of the 
liquid production in sales tanks shall be obtained using correction 
factors and procedures in accordance with the following chapters of API 
MPMS:
    (i)(A) Chapter 2.2A, Measurement and Calibration of Upright 
Cylindrical Tanks by the Manual Strapping Method;
    (B) Chapter 2.2B, Measurement and Calibration of Upright Cylindrical 
Tanks Using the Optical Reference Line Method;
    (C) Standards 2551, 2552, 2555, and 2556;
    (ii)(A) Chapter 3.1A, Standard Practice for the Manual Gauging of 
Petroleum and Petroleum Products;
    (B) Chapter 3.1B, Standard Practice for Level Measurement of Liquid 
Hydrocarbons in Stationary Tanks by Automatic Tank Gauging;
    (C) Standard 2545, Method of Gauging Petroleum Products;
    (iii)(A) Chapter 7.2, Dynamic Temperature Determination;
    (B) Chapter 7.3, Static Temperature Determination Using Portable 
Electronic Thermometers;
    (iv) Chapter 8.1 and 8.2, Sampling;
    (v)(A) Chapter 9.1, Hydrometer Test Method for Density, Relative 
Density (Specific Gravity), or API Gravity of Crude Petroleum and Liquid 
Petroleum Products;
    (B) Chapter 9.2, Pressure Hydrometer Test Method for Density or 
Relative Density;
    (vi)(A) Chapter 10.1, Determination of Sediment in Crude Oils and 
Fuel Oils by the Extraction Method;
    (B) Chapter 10.2, Determination of Water in Crude Oil by 
Distillation;
    1(C) Chapter 10.3, Determination of Water and Sediment in Crude Oil 
by the Centrifuge Method (Laboratory Procedure);
    (D) Chapter 10.4, (Publication 2542) Methods of Test for Water and 
Sediment in Crude Oils;
    (vii) Chapter 11.1, Volume 1, Table 5A, Generalized Crude Oils and 
JP-4, Correction of Observed API Gravity to API Gravity at 60 deg.F, and 
Table 6A, Generalized Crude Oils and JP-4, Correction of Volume to 
60 deg.F, Against API Gravity at 60 deg.F.
    (3) A copy of each completed run ticket written from tank gaugings 
shall be submitted to the Regional Supervisor within 15 days of the run 
ticket being written.

[53 FR 10690, Apr. 1, 1988, as amended at 54 FR 50617, Dec. 8, 1989; 61 
FR 60026, Nov. 26, 1996]



Sec. 250.181  Measurement of gas.

    (a) General. The lessee shall maintain all gas sales or allocation 
meters designated by the Regional Supervisor in accordance with the 
requirements of this section.
    (b) Applications and approvals. The lessee shall not commence 
production

[[Page 351]]

of gas hydrocarbons unless the Regional Supervisor has approved an 
application for measurement of gas production. The application shall be 
submitted to the Regional Supervisor for approval and shall contain 
information sufficient to demonstrate that the requirements of this 
section will be met.
    (c) Gas meter requirements. (1) The measuring equipment shall be 
installed and operated in accordance with the recommendations contained 
in the API MPMS, Chapters 14.3, Parts 1,2, and 3; 14.5; 14.6; and 14.8, 
Natural Gas Fluids Measurement.
    (2) The unit of volume for gas measurement shall be 1 cubic foot at 
a base temperature of 60  deg.F and at a base pressure of 15.025 pounds 
per square inch absolute (psia) (14.73 psia for Pacific OCS Region), and 
the measurement unit shall be 1,000 cubic feet (Mcf) of gas.
    (3) Gas meters shall be operated in accordance with the following 
requirements:
    (i) The Minerals Management Service representatives shall be 
permitted to witness regularly scheduled calibrations and any 
calibration requested by the Regional Supervisor.
    (ii) The integrity of the calibration equipment shall be in 
accordance with the standards in paragraph (c)(1) of this section.
    (iii) Each gas meter shall be calibrated at reasonable intervals not 
to exceed 45 days. For positive displacement or turbine meters, the 
calibration shall be conducted at the average hourly rate of flow since 
the last calibration. For orifice meter installations, the differential 
range and static range shall be consistent with the hourly flow rate. 
The lessee shall retain calibration test data at the field location for 
a period of 2 years.
    (iv) Whenever a meter is not functioning or not registering within 
the limits of accuracy prescribed by the manufacturer, it shall be 
immediately removed from service and not returned to service until 
repaired or adjusted to read accurately.
    (v) During calibration, if readings of static and differential 
pressure are found to be within contractual tolerances with respect to 
test device readings, previous meter readings shall be considered 
correct in computing deliveries of gas since the previous calibration. 
If the readings are greater than contractural tolerances, the volume 
measured since the last calibration shall be corrected as follows:
    (A) If the time the error occurred is ascertainable, the volume 
adjustment shall be calculated for that period of time. No retroactive 
adjustment of volumes metered for allocation beyond a 23-day period is 
required.
    (B) If the time the error occurred is not ascertainable, the volume 
adjustment shall be applied to one-half of the time elapsed since the 
last date of calibration or 23 days, whichever is less.

[53 FR 10690, Apr. 1, 1988, as amended at 61 FR 60026, Nov. 26, 1996]



Sec. 250.182  Surface commingling of production.

    (a) General requirements. For purposes of this subpart, surface 
commingling is the surface mixing of production from two or more leases 
prior to measurement for royalty purposes. The commingling of production 
from different leases prior to measurement for royalty sales 
determination shall be in accordance with this section.
    (b) Applications and approvals. (1) The lessee shall not commence 
commingling of production unless the Regional Supervisor has approved 
the commingling and the method of measurement. The lessee shall submit 
an application for commingling to the Regional Supervisor for approval, 
and the application shall contain appropriate information regarding the 
method of allocation measurement, processing, if applicable, and the 
manner of entry into the particular commingling system.
    (2) All allocation methods and procedures and changes thereto shall 
be approved by the Regional Supervisor.
    (c) Well tests. The lessee shall conduct a well test for allocation 
purposes at least once every 2 months or other period of time as 
determined by the Regional Supervisor and shall retain test data at the 
field location for a period of 2 years. These tests are to be conducted 
in accordance with procedures outlined in Sec. 250.173 of this part and 
can be used when submitting well tests as required in Sec. 250.173.

[[Page 352]]



Sec. 250.183  Site security.

    All locations where oil, gas, or both are measured shall be operated 
and maintained to ensure against the loss or theft of production and to 
assure accurate measurement for royalty purposes. Production, 
transportation to shore, and sales activities shall comply with the 
following requirements:
    (a) The components of sales measuring devices (metering units and 
tanks) shall be sealed in a manner to preclude tampering. Wire or other 
acceptable types of seals shall be numbered and recorded. The list of 
seal numbers and the installation location shall be maintained at the 
field location and be available for inspection by MMS representatives.
    (1) The following metering and sampling unit components shall be 
sealed in such a manner that the component cannot be opened, closed, or 
altered in any way without destroying the seal:
    (i) All meter stack component connections from the base of the stack 
to the register;
    (ii) Sampling system including packing device, fittings, chains, 
sight glass, and container lid;
    (iii) Components of the temperature and gravity compensation device;
    (iv) Additional components as required by the Regional Supervisor;
    (2) All valves on lines leaving an oil storage tank including load-
out line valves, drain-line valves, and connection-line valves between 
sale and nonsale tanks shall be sealed in such a manner that the valve 
is closed and cannot be opened without destroying the seal.
    (b) Each storage tank (sales or inventory) used in the royalty 
determination process shall be clearly identified by a sign that 
contains the name of the facility operator, the size of the tank, and 
the tank number.
    (c) No one shall bypass MMS-approved royalty sales meters and sales 
tanks.
    (d) Evidence of theft or mishandling of production from an offshore 
lease, or of tampering or bypassing with metering or proving devices, or 
of falsifying any measurement of production from an offshore lease shall 
be reported to the Regional Supervisor as soon as possible but not later 
than the next business day after discovery of evidence of theft or 
mishandling.



                         Subpart M--Unitization

    Source: 62 FR 5331, Feb. 5, 1997, unless otherwise noted.



Sec. 250.190  What is the purpose of this subpart?

    This subpart explains how Outer Continental Shelf (OCS) leases are 
unitized. If you are an OCS lessee, use the regulations in this subpart 
for both competitive reservoir and unitization situations. The purpose 
of joint development and unitization is to:
    (a) Conserve natural resources;
    (b) Prevent waste; and/or
    (c) Protect correlative rights, including Federal royalty interests.



Sec. 250.191  What are the requirements for unitization?

    (a) Voluntary unitization. You and other OCS lessees may ask the 
Regional Supervisor to approve a request for voluntary unitization. The 
Regional Supervisor may approve the request for voluntary unitization if 
unitized operations:
    (1) Promote and expedite exploration and development; or
    (2) Prevent waste, conserve natural resources, or protect 
correlative rights, including Federal royalty interests, of a reasonably 
delineated and productive reservoir.
    (b) Compulsory unitization. The Regional Supervisor may require you 
and other lessees to unitize operations if unitized operations are 
necessary to:
    (1) Prevent waste;
    (2) Conserve natural resources; or
    (3) Protect correlative rights, including Federal royalty interests, 
of a reasonably delineated and productive reservoir.
    (c) Unit area. The area that a unit includes is the minimum number 
of leases that will allow the lessees to minimize the number of 
platforms, facility installations, and wells necessary for efficient 
exploration, development, and production of mineral deposits, oil and 
gas reservoirs, or potential hydrocarbon accumulations. A unit may 
include whole leases or portions of leases.

[[Page 353]]

    (d) Unit agreement. You, the other lessees, and the unit operator 
must enter into a unit agreement. The unit agreement must: allocate 
benefits to unitized leases, designate a unit operator, and specify the 
effective date of the unit agreement. The unit agreement must terminate 
when: the unit no longer produces unitized substances, and the unit 
operator no longer conducts drilling or well-workover operations 
(Sec. 250.13) under the unit agreement, unless the Regional Supervisor 
orders or approves a suspension of production under Sec. 250.10.
    (e) Unit operating agreement. The unit operator and the owners of 
working interests in the unitized leases must enter into a unit 
operating agreement. The unit operating agreement must describe how all 
the unit participants will apportion all costs and liabilities incurred 
maintaining or conducting operations. When a unit involves one or more 
net-profit-share leases, the unit operating agreement must describe how 
to attribute costs and credits to the net-profit-share lease(s), and 
this part of the agreement must be approved by the Regional Supervisor. 
Otherwise, you must provide a copy of the unit operating agreement to 
the Regional Supervisor, but the Regional Supervisor does not need to 
approve the unit operating agreement.
    (f) Extension of a lease covered by unit operations. If your unit 
agreement expires or terminates, or the unit area adjusts so that no 
part of your lease remains within the unit boundaries, your lease 
expires unless:
    (1) Its initial term has not expired;
    (2) You conduct drilling, production, or well-reworking operations 
on your lease consistent with applicable regulations; or
    (3) MMS orders or approves a suspension of production or operations 
for your lease.
    (g) Unit operations. If your lease, or any part of your lease, is 
subject to a unit agreement, the entire lease continues for the term 
provided in the lease, and as long thereafter as any portion of your 
lease remains part of the unit area, and as long as operations continue 
the unit in effect.
    (1) If you drill, produce or perform well-workover operations on a 
lease within a unit, each lease, or part of a lease, in the unit will 
remain active in accordance with the unit agreement. Following a 
discovery, if your unit ceases drilling activities for a reasonable time 
period between the delineation of one or more reservoirs and the 
initiation of actual development drilling or production operations and 
that time period would extend beyond your lease's primary term or any 
extension under Sec. 250.13, the unit operator must request and obtain 
MMS approval of a suspension of production under Sec. 250.10 in order to 
keep the unit from terminating.
    (2) When a lease in a unit agreement is beyond the primary term and 
the lease or unit is not producing, the lease will expire unless:
    (i) You conduct a continuous drilling or well reworking program 
designed to develop or restore the lease or unit production; or
    (ii) MMS orders or approves a suspension of operations under 
Sec. 250.10.



Sec. 250.192  What if I have a competitive reservoir on a lease?

    (a) The Regional Supervisor may require you to conduct development 
and production operations in a competitive reservoir under either a 
joint Development and Production Plan or a unitization agreement. A 
competitive reservoir has one or more producing or producible well 
completions on each of two or more leases, or portions of leases, with 
different lease operating interests. For purposes of this paragraph, a 
producible well completion is a well which is capable of production and 
which is shut in at the well head or at the surface but not necessarily 
connected to production facilities and from which the operator plans 
future production.
    (b) You may request that the Regional Supervisor make a preliminary 
determination whether a reservoir is competitive. When you receive the 
preliminary determination, you have 30 days (or longer if the Regional 
Supervisor allows additional time) to concur or to submit an objection 
with supporting evidence if you do not concur. The Regional Supervisor 
will make a final determination and notify you and the other lessees.

[[Page 354]]

    (c) If you conduct drilling or production operations in a reservoir 
determined competitive by the Regional Supervisor, you and the other 
affected lessees must submit for approval a joint plan of operations. 
You must submit the joint plan within 90 days after the Regional 
Supervisor makes a final determination that the reservoir is 
competitive. The joint plan must provide for the development and/or 
production of the reservoir. You may submit supplemental plans for the 
Regional Supervisor's approval.
    (d) If you and the other affected lessees cannot reach an agreement 
on a joint Development and Production Plan within the approved period of 
time, each lessee must submit a separate plan to the Regional 
Supervisor. The Regional Supervisor will hold a hearing to resolve 
differences in the separate plans. If the differences in the separate 
plans are not resolved at the hearing and the Regional Supervisor 
determines that unitization is necessary under Sec. 250.191(b), MMS will 
initiate unitization under Sec. 250.194.



Sec. 250.193  How do I apply for voluntary unitization?

    (a) You must file a request for a voluntary unit with the Regional 
Supervisor. Your request must include:
    (1) A draft of the proposed unit agreement;
    (2) A proposed initial plan of operation;
    (3) Supporting geological, geophysical, and engineering data; and
    (4) Other information that may be necessary to show that the 
unitization proposal meets the criteria of Sec. 250.190.
    (b) The unit agreement must comply with the requirements of this 
part. MMS will maintain and provide a model unit agreement for you to 
follow. If MMS revises the model, MMS will publish the revised model in 
the Federal Register. If you vary your unit agreement from the model 
agreement, you must obtain the approval of the Regional Supervisor.
    (c) After the Regional Supervisor accepts your unitization proposal, 
you, the other lessees, and the unit operator must sign and file copies 
of the unit agreement, the unit operating agreement, and the initial 
plan of operation with the Regional Supervisor for approval.



Sec. 250.194  How will MMS require unitization?

    (a) If the Regional Supervisor determines that unitization of 
operations within a proposed unit area is necessary to prevent waste, 
conserve natural resources of the OCS, or protect correlative rights, 
including Federal royalty interests, the Regional Supervisor may require 
unitization.
    (b) If you ask MMS to require unitization, you must file a request 
with the Regional Supervisor. You must include a proposed unit agreement 
as described in Secs. 250.191(d) and 250.193(b); a proposed unit 
operating agreement; a proposed initial plan of operation; supporting 
geological, geophysical, and engineering data; and any other information 
that may be necessary to show that unitization meets the criteria of 
Sec. 250.190. The proposed unit agreement must include a counterpart 
executed by each lessee seeking compulsory unitization. Lessees who seek 
compulsory unitization must simultaneously serve on the nonconsenting 
lessees copies of:
    (1) The request;
    (2) The proposed unit agreement with executed counterparts;
    (3) The proposed unit operating agreement; and
    (4) The proposed initial plan of operation.
    (c) If the Regional Supervisor initiates compulsory unitization, MMS 
will serve all lessees of the proposed unit area with a proposed 
unitization plan and a statement of reasons for the proposed 
unitization.
    (d) The Regional Supervisor will not require unitization until MMS 
provides all lessees of the proposed unit area written notice and an 
opportunity for a hearing. If you want MMS to hold a hearing, you must 
request it within 30 days after you receive written notice from the 
Regional Supervisor or after you are served with a request for 
compulsory unitization from another lessee.
    (e) MMS will not hold a hearing under this paragraph until at least 
30 days after MMS provides written notice of the hearing date to all 
parties

[[Page 355]]

owning interests that would be made subject to the unit agreement. The 
Regional Supervisor must give all lessees of the proposed unit area an 
opportunity to submit views orally and in writing and to question both 
those seeking and those opposing compulsory unitization. Adjudicatory 
procedures are not required. The Regional Supervisor will make a 
decision based upon a record of the hearing, including any written 
information made a part of the record. The Regional Supervisor will 
arrange for a court reporter to make a verbatim transcript. The party 
seeking compulsory unitization must pay for the court reporter and pay 
for and provide to the Regional Supervisor within 10 days after the 
hearing three copies of the verbatim transcript.
    (f) The Regional Supervisor will issue an order that requires or 
rejects compulsory unitization. That order must include a statement of 
reasons for the action taken and identify those parts of the record 
which form the basis of the decision. Any adversely affected party may 
appeal the final order of the Regional Supervisor under 30 CFR part 290.



                    Subpart N--Remedies and Penalties



Sec. 250.200  Remedies.

    (a)(1) Whenever the Regional Director determines, on the basis of 
available evidence, that a violation of or failure to comply with any 
provision of the Outer Continental Shelf Lands Act (Act), or any 
provision of a lease, license, or permit issued pursuant to the Act, or 
any provision of any regulation issued under the Act (hereinafter 
referred to as ``violation'') probably occurred and that such violation 
continued beyond actual notice of the violation and the expiration of 
any reasonable period allowed for corrective action or that the 
violation may constitute or may have constituted a threat of serious, 
irreparable, or immediate harm or damage to life (including fish and 
other aquatic life), property, any mineral deposit, or the marine, 
coastal, or human environment, the Regional Director may direct the 
preparation of a case file, and appoint a Minerals Management Service 
(MMS) employee to serve as a Reviewing Officer. In making this 
determination, the Regional Director shall have the authority to summon 
witnesses, administrator oaths, and issue orders to produce evidence. 
Chairmen of investigative panels appointed by the Regional Director to 
investigate violations or other matters shall also have authority to 
summon witnesses, administer oaths, and issue orders to produce evidence 
while conducting investigations.
    (2) The Reviewing Officer shall have no other responsibility, direct 
or supervisory, for the investigation or prosecution of the case.
    (3) The Reviewing Officer shall decide each case on the basis of the 
evidence of record.
    (4) The Reviewing Officer may administer oaths and issue subpoenas 
requiring the attendance of witnesses at hearings or for the taking of 
depositions and may issue orders to produce evidence.
    (5) The Reviewing Officer may assess civil penalties and, when 
appropriate, recommend the initiation of criminal proceedings.
    (b) The Reviewing Officer shall proceed with provisions of paragraph 
(c) of this section upon determining that there is sufficient evidence 
that a violation probably occurred and that:
    (1) The violation continued beyond any notice of such failure and 
the expiration of any reasonable period allowed for corrective action, 
or
    (2) The violation constitutes or constituted a threat of serious, 
irreparable, or immediate harm or damage to life (including fish and 
other aquatic life), property, any mineral deposit, or the marine, 
coastal, or human environment.
    (c) The Reviewing Officer shall notify, in writing, the person 
alleged to have committed the violation (hereinafter referred to as 
``party'') of the following:
    (1) The alleged violation, citing the applicable provision of the 
Act, or the applicable term of a lease, license, or permit issued 
pursuant to the Act, or the applicable provision of a regulation or 
order issued under the Act upon which the action is based;

[[Page 356]]

    (2) The amount of penalty that appears to be appropriate in the 
event it is determined that the party is responsible for the alleged 
violation based upon the material then available for the Reviewing 
Officer;
    (3) The party's right to examine the material in the case file and 
to have a copy of all written documents provided upon request, except 
those which would, in a civil proceeding, disclose or lead to the 
disclosure of a confidential informant; and
    (4) The fact that, subject to the provisions in Sec. 250.201 of this 
part, the party has a right to a hearing before the Reviewing Officer 
prior to any finding of fact regarding the alleged violation.
    (d) A party has the right to be represented by counsel, qualified to 
practice before the Department of the Interior (DOI) under 43 CFR part 
1, at all stages of the proceeding. After receiving notification that a 
party is represented by counsel, the Reviewing Officer shall direct all 
further communications to the counsel.

[53 FR 10690, Apr. 1, 1988, as amended at 56 FR 21954, May 13, 1991]



Sec. 250.201  Hearings.

    (a) Within 30 days after receipt of a notice pursuant in 
Sec. 250.200(b) of this part, the party may accomplish one of the 
following:
    (1) Request a hearing before the Reviewing Officer,
    (2) Provide any written evidence and arguments in lieu of a hearing, 
or
    (3) Pay the amount specified in the notice.
    (b) A request for a hearing before the Reviewing Officer shall be in 
writing and specify the particular issues which are in dispute. Failure 
to specify a nonjurisdictional issue will preclude its consideration 
except as the Reviewing Officer determines to be necessary or desirable 
in the interest of obtaining a fair resolution of the case.
    (1) The Reviewing Officer may grant the party additional time to 
submit a request for a hearing.
    (2) The Reviewing Officer shall promptly schedule all requested 
hearings to be held in the office of the Reviewing Officer or such other 
location as the Reviewing Officer may designate. The Reviewing Officer 
shall grant any delays or continuances which the Reviewing Officer 
determines to be necessary or desirable in the interest of obtaining a 
fair resolution of the case.
    (c) Prior to a hearing, the party may examine all evidence in the 
case file except material that would disclose or lead to the disclosure 
of the identity of a confidential informant.
    (d)(1) Confidential treatment shall be accorded to all or a portion 
of any document at the request of the person supplying the information 
if the information is as follows:
    (i) Confidential financial information, trade secrets, or other 
material exempt from disclosure under the Freedom of Information Act (5 
U.S.C. 552);
    (ii) Information required to be held in confidence by these 
regulations; or
    (iii) Information that is otherwise exempt by law from disclosure.
    (2) The person desiring confidential treatment of information shall 
submit a written request to the Reviewing Officer stating the reasons 
justifying nondisclosure.
    (e) The Regional Director may, upon request of a party, transfer the 
case to another Reviewing Officer or direct that the hearing be held at 
a location other than that specified by the Reviewing Officer.
    (f)(1) The testimony of any witness may be presented either through 
a personal appearance or through a written statement.
    (2) A witness may be required to attend a hearing or the taking of a 
deposition at a place not more than 100 miles from the place of service.
    (3) Witnesses subpoenaed shall be paid the same fees and mileage 
paid for similar services in the U.S. District Courts. These expenses 
shall be paid by the party at whose insistence the witness appears.
    (4) Any witness who attends a hearing or the taking of a deposition 
at the request of the party, without having been subpoenaed to do so, 
shall be entitled to the same mileage and attendance fees paid to a 
subpoenaed witness. The witness fees and mileage shall be paid by the 
party at whose request the witness appears.

[[Page 357]]

    (5) In cases where an individual cannot be required to appear as a 
witness, the Reviewing Officer may move the hearing to the location of 
the desired witness, accept a written statement, or accept a stipulation 
in lieu of testimony.



Sec. 250.202  Hearing procedures.

    (a) Material in the case file which is pertinent to the issues shall 
be presented to the party who may respond to or rebut this material. The 
party may offer any facts, statements, explanations, documents, sworn or 
unsworn testimony, or other items which bear on the issues or which may 
be relevant to the amount of the penalty to be assessed if the party is 
found to be guilty of the alleged violation. The Reviewing Officer may 
require the authentication of any written exhibit or statement.
    (b) The party may request an opportunity to submit additional 
written testimony for consideration by the Reviewing Officer. The 
Reviewing Officer shall allow a reasonable time for submission of 
additional written testimony and shall specify the date by which it must 
be received.
    (c) The Reviewing Officer may take notice of matters which are 
subject to a high degree of indisputability and are commonly known in 
the community or are ascertainable from readily available sources of 
known accuracy. Prior to taking notice of a matter, the Reviewing 
Officer shall give the party an opportunity to show why notice should 
not be taken. In any case in which such notice is taken, the Reviewing 
Officer shall place in the record a written statement on the matter of 
which notice was taken and the basis for taking such notice. The 
Reviewing Officer's statement shall indicate that the party consented to 
notice being taken or shall include a summary of the party's objections 
to notice being taken of a specific matter.
    (d) In evaluating the evidence presented, the Reviewing Officer 
shall give due consideration to the reliability and relevance of each 
item of evidence but is not bound by strict rules of evidence.
    (e)(1) A verbatim transcript of hearings before a Reviewing Officer 
need not be prepared. The Reviewing Officer shall prepare notes on the 
material and points raised by the party in sufficient detail to permit a 
full and fair review and resolution of the case should it be appealed.
    (2) A party may, at its own expense, cause a verbatim transcript to 
be made. If a verbatim transcript is made and the Reviewing Officer's 
decision is appealed, the party shall submit a copy of the verbatim 
transcript with the appeal to the Director and to the Reviewing Officer 
for inclusion in the case file.



Sec. 250.203  Reviewing Officer's decision.

    (a) The Reviewing Officer's decision shall be in writing and shall 
include the Reviewing Officer's conclusions and the basis for the 
conclusions. Any decision shall be based upon substantial evidence in 
the record. The Reviewing Officer shall dismiss the case and remand it 
to the Regional Director if the Reviewing Officer finds that:
    (1) There is not substantial evidence in the record establishing 
that the alleged violation occurred,
    (2) For a violation under Sec. 250.200(b)(1) of this part, either 
the required notice of the alleged violation was not provided or that 
the alleged violation did not continue after the termination of any 
period provided for the taking of corrective action, or
    (3) For a violation under Sec. 250.200(b)(2) of this part, there is 
not substantial evidence on the record that, at the time of the 
discovery of the violation or during a time prior to the discovery of 
the violation, the violation constituted a threat of serious, 
irreparable, or immediate harm or damage to life (including fish and 
other aquatic life), property, any mineral deposit, or the marine, 
coastal, or human environment.
    (b) A dismissal under paragraph (a) of this section is without 
prejudice to the Regional Director's right to refile the case and have 
it reheard if additional evidence is obtained. A dismissal following a 
rehearing is final and with prejudice.
    (c) The Reviewing Officer's decision shall contain a statement 
advising the party of the right to an administrative appeal to the 
Director pursuant to 30 CFR part 290 of this title. The party shall be 
advised that failure to submit

[[Page 358]]

an appeal within the prescribed time will bar its consideration and that 
failure to appeal on the basis of a particular issue will constitute a 
waiver of that issue in any subsequent proceeding. An appeal from any 
interim ruling of the Reviewing Officer shall be reserved and considered 
only at the time of and as part of an appeal from the Reviewing 
Officer's final decision.

[53 FR 10690, Apr. 1, 1988, as amended at 56 FR 21955, May 13, 1991]



Sec. 250.204  Appeals from Reviewing Officer's decision.

    (a)(1) Any appeal from a decision of the Reviewing Officer, together 
with any supporting argument, shall be submitted by a party to the 
Director within 30 days after the date of receipt of the decision. The 
appellant shall provide a copy of the notice of appeal and supporting 
brief to the Reviewing Officer. Except as provided in Sec. 250.205 of 
this part, the only issues which will be considered on appeal are 
jurisdictional questions and those issues specified in the notice of 
appeal which were properly raised before the Reviewing Officer.
    (2) The failure to file a notice of appeal within the time 
prescribed shall result in the action of the Reviewing Officer becoming 
the final action of the DOI in the case.
    (b) A copy of all of the Reviewing Officer's comments on the appeal 
submitted to the Director shall be provided to the appellant.
    (c)(1) The Director may affirm, reverse, or modify the Reviewing 
Officer's decision or remand the case for new or additional proceedings.
    (2) The Director may increase, remit, mitigate, or suspend, in whole 
or in part, any penalty assessed by the Reviewing Officer.
    (d) The Director's decision shall be in writing, and copies shall be 
provided to the appellant and the Reviewing Officer.
    (e) In the absence of an appeal from the Director's decision 
pursuant to 30 CFR part 290, the Director's decision on an appeal shall 
be final. (See Sec. 250.24 of this part.)

[53 FR 10690, Apr. 1, 1988, as amended at 54 FR 50617, Dec. 8, 1989]



Sec. 250.205  Reopening a case.

    (a)(1) At any time prior to final MMS action in a civil-penalty 
case, a party may petition to reopen the proceedings on the basis of 
newly discovered evidence.
    (2) Petitions to reopen a case must be in writing. Petitions shall 
describe the newly found evidence and state why the evidence would 
probably produce a different result favorable to the petitioner. The 
petitioner shall state whether the evidence was known to the petitioner 
at the time of the proceedings and, if not, why the newly found evidence 
could not have been discovered during the previous proceedings. The 
party shall submit the petition to the Reviewing Officer and provide a 
copy to the Regional Director.
    (3) The Reviewing Officer shall consider a petition to reopen a case 
unless an appeal has been filed. In those cases where an appeal has been 
timely filed, a petition to reopen a case shall be considered by the 
Director.
    (4) A petition to reopen a case shall be granted only when the 
Reviewing Officer or Director determines that the petition explains why 
newly found evidence that would have a direct and material bearing on 
the issue(s) of the case was not and could not have been produced at the 
time of the previous proceedings. A decision on a petition to reopen a 
case shall be in writing. A new decision issued by the Reviewing 
Officer, on the basis of newly found evidence, may be appealed to the 
Director in accordance with Sec. 250.204 of this part.
    (b) The denial of a petition to reopen a case shall be final and may 
not be appealed in an action separate from the appeal of the case 
pursuant in Sec. 250.204 of this part or 30 CFR part 290 of this title.
    (c) The Regional Director may, on the basis of newly found evidence, 
that would probably produce a different result, reopen a case pursuant 
to Sec. 250.203(a) of this part.



Sec. 250.206  Civil penalties.

    (a)(1) If the Reviewing Officer determines that a civil penalty is 
to be assessed, the penalty shall not exceed $20,000 for each day of the 
continuation of the violation. For violations described in 
Sec. 250.200(b)(1) of this part, the

[[Page 359]]

penalty may be assessed for each day the violation continues after 
notice and a reasonable period for corrective action. For violations 
described in Sec. 250.200(b)(2) of this part, the penalty may be 
assessed for each day the violation continued after it first occurred.
    (2) If the Reviewing Officer's decision is appealed to the Director, 
payment of a civil-penalty shall not be due until after the Director's 
decision on the appeal is issued. If administrative relief is pursued 
following the Director's decision, a bond guaranteeing payment may be 
posted in lieu of actual payment.
    (3) The MMS's Associate Director for Royalty Management shall 
collect civil-penalties assessed by a Reviewing Officer, the Director, 
or DOI's Board of Land Appeals.
    (4) Payment of a civil-penalty shall be in accordance with 
instructions that accompany the Bill for Collection (Form DI-1040) sent 
to the party upon whom the penalty is imposed.
    (b) Within 30 days after receipt of the bill issued by MMS's Royalty 
Management Program Accounting Division, the party shall submit payment 
of the assessed penalty to MMS's Accounting Center unless an appeal is 
filed in accordance with Sec. 250.204 of this part. Failure to either 
make timely payment or file a timely appeal will result in the 
collection of the amount assessed plus interest from the date of 
assessment until the date of payment as determined by MMS. Interest 
shall be computed on a daily basis at the rate applicable under section 
6621 of the Internal Revenue Code of 1954. Such failure may also result 
in the initiation of additional enforcement proceedings including, if 
appropriate, cancellation of the lease or permit or forfeiture of a bond 
under this part.

[53 FR 10690, Apr. 1, 1988, as amended at 54 FR 50617, Dec. 8, 1989; 56 
FR 21955, May 13, 1991]



                           Subpart O--Training

    Source: 62 FR 5322, Feb. 5, 1997, unless otherwise noted.



Sec. 250.209  Question index table.

    The table in this section lists frequently asked training questions 
and the location for the answers. The subjects are grouped as follows:
    (a) General training requirements--Secs. 250.211 through 250.216.
    (b) Departures from training requirements--Secs. 250.217 through 
250.222.
    (c) Training program accreditations--Secs. 250.223 through 250.229 
and Sec. 250.233.
    (d) MMS testing information--Secs. 250.230 through 250.232.

------------------------------------------------------------------------
               Frequently asked questions                  CFR citation 
------------------------------------------------------------------------
What is MMS's goal for well control and production                      
 safety systems training?...............................   Sec.  250.211
What type of training must I provide for my employees?..   Sec.  250.212
What documentation must I provide to trainees?..........   Sec.  250.213
How often must I provide training to my employees and                   
 for how many hours?....................................   Sec.  250.214
Where must I get training for my employees?.............   Sec.  250.215
Where can I find training guidelines for other topics?..   Sec.  250.216
Can I get an exception to the training requirements?....   Sec.  250.217
Can my employees change job certification?..............   Sec.  250.218
What must I do if I have temporary employees or on-the-                 
 job trainees?..........................................   Sec.  250.219
What must manufacturer's representatives in production                  
 safety systems do?.....................................   Sec.  250.220
May I use alternative training methods?.................   Sec.  250.221
What is MMS looking for when it reviews an alternative                  
 training program?......................................   Sec.  250.222
Who may accredit training organizations to teach?.......   Sec.  250.223
How long is a training organization's accreditation                     
 valid?.................................................   Sec.  250.224
What informaiton must a training organization submit to                 
 MMS?...................................................   Sec.  250.225
What additional requirements must a training                            
 organization follow?...................................   Sec.  250.226
What are MMS's requirements for the written test?.......   Sec.  250.227
What are MMS's requirements for the hands-on simulator                  
 and well test?.........................................   Sec.  250.228
What elements must a basic course cover?................   Sec.  250.229
If MMS tests employees at my worksite, what must I do?..   Sec.  250.230
If MMS tests trainees at a training organization's                      
 facility, what must occur?.............................   Sec.  250.231
Why might MMS conduct its own tests?....................   Sec.  250.232
Can a training organization lose its accreditation?.....   Sec.  250.233
------------------------------------------------------------------------


[[Page 360]]



Sec. 250.210  Definitions.

    Terms used in this subpart have the following meaning:
    Alternative training methods means self-paced or team-paced training 
that may use a computer-based system such as compact disc interactive 
(CDI), compact disc read only memory (CDROM), or Laser Discs.
    Completed training means that the trainee successfully met MMS's 
requirements for that training.
    Employees means direct employees and contract employees of lessees.
    Floorhands means rotary helpers, derrickmen, or their equivalent.
    I or you means the lessee or contractor engaged in oil, gas or 
sulphur operations in the Outer Continental Shelf (OCS).
    Installing means both installing the original equipment and 
replacing the equipment.
    Lessee means the person, organization, agent, or designee authorized 
to explore, develop, and produce leased deposits.
    Maintaining means preventive maintenance, routine repair, and 
replacing defective components.
    Operating means testing, adjusting, calibrating, and recording test 
and calibration results for the equipment.
    Production safety systems employee means employees engaged in 
installing, repairing, testing, maintaining, or operating surface or 
subsurface safety devices and the platform employee who is responsible 
for production operations.
    Supervisors means the driller, toolpusher, operator's 
representative, or their equivalent.
    Training means a basic or an advanced class in well control for 
drilling, well completion/well workover, well servicing, and production 
safety systems.
    Training organization means a party approved by MMS to teach well 
control for drilling, well completion/well workover, and well servicing, 
and production safety systems.
    Well-completion/well-workover (WO) well control includes small 
tubing operations.
    Well-servicing (WS) well control means snubbing and coil tubing.
    Well-workover rig means a drilling rig used for well completion/well 
workover.



Sec. 250.211  What is MMS's goal for well control and production safety systems training?

    The goal is to ensure that employees who work in the following areas 
receive training that results in safe and clean operations:
    (a) Drilling well control;
    (b) WO well control;
    (c) WS well control; and
    (d) Production safety systems.



Sec. 250.212  What type of training must I provide for my employees?

    You must provide training for your employees according to the table 
in this section.

------------------------------------------------------------------------
                                    Training                            
      Type of employee            requirements            Comments      
------------------------------------------------------------------------
Drilling floorhand..........  Drilling well-                            
                               control course.\1\                       
                              Complete a well-      You must log the    
                               control drill at      time it took to    
                               the job site within   complete each drill
                               the time limit        in the driller's   
                               prescribed by         log and furnish the
                               company operating     time to the        
                               procedures.\2\.       floorhand.         
                              Participate in well-  You must record the 
                               control drills        date and time it   
                               under subpart D of    took to complete   
                               this part.\2\.        each drill in the  
                                                     driller's log.     
                              Receive copy of a                         
                               drilling well-                           
                               control manual.\2\                       
Drilling supervisor.........  Drilling well-                            
                               control course.\1\                       
                              Qualify to direct                         
                               well-control                             
                               operations.\1\                           
WO floorhands...............  WO well-control                           
                               course.\1\                               
                              Complete the          You must record the 
                               qualifying test       date and time it   
                               consisting of a       took to complete   
                               well-control drill    each drill in the  
                               at the job site       operations log.    
                               within the time                          
                               limit set by                             
                               company                                  
                               procedures.\2\.                          
                              Participate in                            
                               weekly well-control                      
                               drills under                             
                               subparts E and F of                      
                               this part.\2\                            
                              Receive a well-                           
                               control manual.\2\                       
WO supervisors..............  WO well-control                           
                               course.\1\                               
                              Qualify to direct                         
                               well-control                             
                               operations.\1\                           
WS work crews...............  At least one crew     Trained employee    
                               member is trained     must be in work    
                               in WS well            area at all times  
                               control.\1\.          during snubbing or 
                                                     coil tubing        
                                                     operations.        

[[Page 361]]

                                                                        
                              At least one crew                         
                               member must be                           
                               qualified to direct                      
                               well-control                             
                               operations.\1\                           
Production safety systems     Must complete                             
 employees.                    training that                            
                               enables them to                          
                               install, test,                           
                               maintain, & operate                      
                               subsurface safety                        
                               devices.\1\                              
Employees who work in well    Either WO well-                           
 completion operations         control course or                        
 before or during tree         drilling well-                           
 installation.                 control course.\1\                       
------------------------------------------------------------------------
\1\ Employee may not work in the OCS unless this requirement is met.    
\2\ Employee must complete this requirement before exceeding 6 months of
  cumulative employment.                                                



Sec. 250.213  What documentation must I provide to trainees?

    You must give your employees documents that show they have completed 
the training course(s) required for their job. The employees must carry 
the documents or keep them at the job site.



Sec. 250.214  How often must I provide training to my employees and for how many hours?

    (a) You must ensure that applicable employees complete basic or 
advanced well-control training at least every 2 years. For example, if 
your employees complete a well-control course on October 31, 1998, they 
must again complete the training by October 31, 2000.
    (b) You must ensure that applicable employees complete basic or 
advanced production safety systems training at least every 3 years. For 
example, if your employees complete production safety systems training 
on October 31, 1998, they must again complete the training by October 
31, 2001.
    (c) You must ensure that your employees have at least the amount of 
training listed in the table in Sec. 250.214(c). The maximum number of 
hours per day of well control or production safety instruction time is 9 
hours.

                             Training Hours                             
------------------------------------------------------------------------
                                     Surface       Subsea               
                                     option,      option,    No options,
      Basic/advanced course          minimum      minimum      minimum  
                                      hours      hours \1\      hours   
------------------------------------------------------------------------
Drilling (D).....................           28           32  ...........
Well Completion/Workover (WO)....           32           36  ...........
Well Servicing (WS)..............  ...........  ...........           18
Combination D/WO.................           40           44  ...........
Combination D/WS.................           44           48  ...........
Combination WO/WS................           48           52  ...........
Combination D/WO/WS..............           55           59  ...........
Production Safety Systems........  ...........  ...........          30 
------------------------------------------------------------------------
\1\ The subsea option includes the minimum hours from the surface option
  plus 4 hours.                                                         

    (d) For the first training course after March 7, 1997, you must 
ensure that your employee follows the following transition schedule 
table for well control.

                         Well Control Transition                        
------------------------------------------------------------------------
           If your employees                 Then the employees must    
------------------------------------------------------------------------
A. Completed a basic course on or after  A. Complete an appropriate     
 March 7, 1996 or                         basic course within 2 years to
                                          maintain certification,\1\ or 
B. Completed a basic course before       B. Complete an appropriate     
 March 7, 1996.                           basic course by March 9, 1998 
                                          .\2\                          
------------------------------------------------------------------------
\1\ Example A: If the effective date of this regulation is November 1,  
  1996, and your employees completed a basic course in Drilling and     
  Workover/Completion well control on December 9, 1995, your employees  
  must complete a basic Drilling and Workover/Completion well-control   
  course by December 9, 1997.                                           
\2\ Example B: If the effective date of this regulation is November 1,  
  1996, and your employees completed a basic course in Well Servicing   
  [snubbing option] well control on November 15, 1994, your employees   
  must complete a basic course in Well Servicing [snubbing option] by   
  November 1, 1997.                                                     

    (e) For the first training course after March 7, 1997, you must 
ensure that your employee follows the following transition schedule 
table for production.

[[Page 362]]



                          Production Transition                         
------------------------------------------------------------------------
           If your employees                 Then your employees must   
------------------------------------------------------------------------
A. Completed a basic course on or after  A. Complete a basic course     
 September 7, 1995, or                    within 3 years to maintain    
                                          certification, or             
B. Completed a basic course before       B. Complete a basic course by  
 September 7, 1995.                       September 7, 1998.            
------------------------------------------------------------------------

    (f) After your employee completes the transition training specified 
in paragraph (d) or (e) of this section, the training cycle will be 2 
years for well control and 3 years for production training (as shown in 
Sec. 250.214 (a) and (b)).

[62 FR 5323, Feb. 5, 1997, as amended at 62 FR 7298, Feb. 18, 1997]



Sec. 250.215  Where must I get training for my employees?

    You must provide training by a training organization or program 
approved by MMS.



Sec. 250.216  Where can I find training guidelines for other topics?

    You can find guidelines in the subparts shown in the following 
table:

------------------------------------------------------------------------
                    Topic                         Subpart of part 250   
------------------------------------------------------------------------
Pollution control...........................  C                         
Crane operations............................  A                         
Welding and burning.........................  D                         
Hydrogen sulfide............................  D                         
------------------------------------------------------------------------



Sec. 250.217  Can I get an exception to the training requirements?

    MMS may grant an exception to well control or production safety 
systems training if:
    (a) MMS determines that the exception won't jeopardize the safety of 
your personnel or create a hazard to the environment; and
    (b) You need the exception because of unavoidable circumstances that 
make compliance infeasible or impractical.



Sec. 250.218  Can my employees change job certification?

    Only if you ensure that the employees complete training for the new 
job before entering on duty.



Sec. 250.219  What must I do if I have temporary employees or on-the-job trainees?

    You must ensure that temporary employees and on-the-job trainees 
complete the appropriate training unless a trained individual is 
directly supervising the employee.



Sec. 250.220  What must manufacturer's representatives in production safety systems do?

    A manufacturer's representative who is working on company supplied 
equipment must:
    (a) Receive training by the manufacturer to install, service, or 
repair the specific safety device or safety systems; and
    (b) Have an individual trained in production safety systems (who is 
also capable of evaluating the impact of the work done) accompany her/
him.



Sec. 250.221  May I use alternative training methods?

    (a) You may receive a 1-year provisional approval from MMS to use 
alternative training methods that may involve team or self-paced 
training using a computer-based system.
    (b) You may receive up to 3 additional years (4 years total) from 
MMS to use alternative training methods (through onsite reviews).



Sec. 250.222  What is MMS looking for when it reviews an alternative training program?

    (a) The alternative training must teach methods to operate equipment 
that result in safe and clean operations.
    (b) MMS will determine, through onsite MMS reviews and unannounced 
audits during the provisional period, if the:
    (1) Training environment is conducive to learning;

[[Page 363]]

    (2) Trainees interact effectively with the moderator or training 
administrator,
    (3) Trainees function as a team (for well control only); and
    (4) Tests are challenging and cover all important safety concepts 
and practical procedures to ensure safety.
    (c) MMS may also speak with the trainees to determine if the 
trainees felt the training met their needs for their job.



Sec. 250.223  Who may accredit training organizations to teach?

    MMS may accredit a training organization or program.



Sec. 250.224  How long is a training organization's accreditation valid?

    An accreditation is valid for a maximum of 4 years. A training 
organization may apply to MMS before the fourth anniversary of the 
effective accreditation date. The training organization must state the 
changes (additions and deletions) to the last approved training 
curriculum and plan.



Sec. 250.225  What information must a training organization submit to MMS?

    (a) Two copies of the detailed plan that includes the:
    (1) Curriculum;
    (2) Names and credentials of the instructors;
    (3) Mailing and street address of the training facility and the 
location of the records;
    (4) Location for the simulator and lecture areas and how the 
training organization separates the areas;
    (5) Presentation methods (video, lecture, film, etc.);
    (6) Percentage of time for each presentation method;
    (7) Testing procedures and a sample test; and
    (8) List of any portions of the course that cover the subsea 
training option instead of the surface training option.
    (b) Two copies of the training manual.
    (c) A cross-reference that relates the requirements of this supbart 
to the elements in the program.
    (d) A copy of the handouts.
    (e) A copy of the training certificate that includes the following:
    (1) Candidate's full name;
    (2) Candidate's social security number,
    (3) Name of the training school;
    (4) Course name (e.g., basic WS well-control course);
    (5) Option (surface or subsea);
    (6) Training completion date;
    (7) Job classification (e.g., drilling supervisor); and
    (8) Certificate expiration date.
    (f) Course outlines identified by:
    (1) Name (e.g., ``WS well-control course'');
    (2) Type (basic or advanced); and
    (3) Option (surface or subsea).
    (g) Time (hours per student) for the following:
    (1) Teaching;
    (2) Using the simulator (for well control);
    (3) Hands-on training (for production safety systems); and
    (4) Completing the test (written and simulator).
    (h) Special instruction methods for students who respond poorly to 
conventional training (including oral assistance).
    (i) Additional materials (for the advanced training option) such as 
advanced training techniques or case studies.
    (j) Information on the 3-D simulator or test wells:
    (1) Capability for surface and/or subsea drilling well control, WO 
and completion training;
    (2) Capability to simulate lost circulation and secondary kicks; and
    (3) Types of kicks.



Sec. 250.226  What additional requirements must a training organization follow?

    (a) The training organization must keep training records for each 
trainee for 5 years. For example, if a trainee completed a well-control 
course in 1996, the training organization may destroy the records at the 
end of the year 2001. The training organization must keep the following 
trainee record information:
    (1) Daily attendance record including complete student sign-in sheet 
and makeup time;

[[Page 364]]

    (2) Written test and retest (including simulator test);
    (3) Evaluation of the trainee's simulator test or retest;
    (4) ``Kill sheets'' for simulator test or retest; and
    (5) Copy of the trainee's certificate.
    (b) Keep records of the training program for 5 years. The 5-year 
timeframe starts with the program approval date. For example, if a 
training program was accredited in 1995, at the end of the year 2000, 
the training organization may destroy the records for 1995. Keep the 
following training record information:
    (1) Complete and current training program plan and a technical 
manual;
    (2) A copy of each class roster; and
    (3) Copies of schedules and schedule changes.
    (c) Supply trainees with current copies of Government regulations on 
the training subject matter.
    (d) Provide a certificate to each trainee who successfully completes 
training.
    (e) Ensure that the subsea training option has an additional 4 hours 
of training and covers problems in well control when drilling with a 
subsea blowout preventer (BOP) stack including:
    (1) Choke line friction determinations;
    (2) Using marine risers;
    (3) Riser collapse;
    (4) Removing trapped gas from the BOP after controlling a well kick; 
and
    (5) ``U'' tube effect as gas hits the choke line.
    (f) Ensure that trainees who are absent from any part of a course 
make up the missed portion within 14 days after the end of the course 
before providing a written or simulator test to the trainee.
    (g) Ensure that classes contain 18 or fewer candidates.
    (h) Furnish a copy of the training program and plan to MMS personnel 
for their use during an onsite review.
    (i) Submit the course schedule to the approving organization after 
approval of the training program, annually, and before any program 
changes. The schedule must include the:
    (1) Name of the course;
    (2) Class dates;
    (3) Type of course; and
    (4) Course location.
    (j) Provide all basic course trainees a copy of the training manual.
    (k) Provide all advanced course trainees handouts necessary to 
update the manuals the trainee has as a result of previous training 
courses.
    (l) When each course ends, send MMS a letter and a class roster. The 
class roster must contain the following information for each trainee:
    (1) Name of training organization;
    (2) Course location (e.g., Thibodeaux, Louisiana);
    (3) Trainee's full name;
    (4) Name of course (e.g., Drilling well control or WS well control);
    (5) Course type (i.e., basic or advanced training);
    (6) Options (e.g., subsea);
    (7) Date trainee completed course;
    (8) Name(s) of instructor(s) teaching the course;
    (9) The trainee's social security number;
    (10) Trainee's employer;
    (11) Actual job title of trainee;
    (12) Job of each awarded certificate; and
    (13) Test scores (including course element scores) for each 
successful trainee.
    (m) Ensure that test scores for combination training have a separate 
score element for each designation and for each option. For example, 
training in subsea drilling and in WO would have separate test scores 
for the drilling, WO, and for the subsea portion.



Sec. 250.227  What are MMS's requirements for the written test?

    (a) The training organization must:
    (1) Administer the test at the training facility;
    (2) Use 70 percent as a passing grade for each course element 
(drilling, well completion, etc.);
    (3) Ensure that the tests are confidential and nonrepetitive;
    (4) Offer a retest, when necessary, using different questions of 
equal difficulty;
    (5) Allow open-book regulations and a formula sheet (without 
examples) for well control only; and

[[Page 365]]

    (6) Allocate no more than the following amount of time to the 
minimum instruction time: 1 hour for a single course, 2 hours for a 
combination of two basic courses, or 2.5 hours for a combination of 
three or more courses.
    (b) A trainee who fails a retest must repeat the training and pass 
the test in order to work in the OCS in their job classification.



Sec. 250.228  What are MMS's requirements for the hands-on simulator and well test?

    (a) The training organization must ensure that:
    (1) The test simulates a surface BOP (or subsea stack for the subsea 
option) and the simulator is 3-D with actual gauges and dials.
    (2) The instructor runs only one simulator and has a maximum of 
three students in each team.
    (3) The simulator test time allocated to the minimum instruction 
time is 1 hour per course (i.e., 2 hours for a combination of two basic 
courses, etc.).
    (4) The trainees are able to:
    (i) Kill the well before removing the tree;
    (ii) Determine slow pump rates;
    (iii) Recognize kick warnings signs;
    (iv) Shut in a well;
    (v) Complete kill sheets;
    (vi) Initiate kill procedures;
    (vii) Maintain appropriate bottomhole pressure;
    (viii) Maintain constant bottomhole pressure;
    (ix) Recognize and handle unusual well-control situations;
    (x) Control the kick as it reaches the choke line; and
    (xi) Determine if kick gas or fluids are removed.
    (5) In the subsea option, the trainees are able to:
    (i) Determine choke line friction pressures for subsea BOP stacks; 
and
    (ii) Discuss and demonstrate procedures such as circulating the 
riser and removing trapped gas in a subsea BOP stack.
    (6) Offer a retest, when necessary, using different questions of 
equal difficulty.
    (b) A trainee who fails a retest must repeat the training and pass 
the test to work in the OCS in their job classification.

[62 FR 5326, Feb. 5, 1997, as amended at 62 FR 7298, Feb. 18, 1997]



Sec. 250.229  What elements must a basic course cover?

    See Table (a) of this section for well control and Table (b) of this 
section for production safety systems. The checks in Table (a) indicate 
the required training elements that apply to each job. Tables (a) and 
(b) follow:

                                            Table (a).--Well Control                                            
----------------------------------------------------------------------------------------------------------------
                                             Drilling                           WO                              
   Elements for basic training   ----------------------------------------------------------------       WS      
                                       Super           Floor           Super           Floor                    
----------------------------------------------------------------------------------------------------------------
1. Hands-on:                                                                                                    
    Training to operate choke     ..............           ..............           ..............
     manifold.                                                                                                  
    Training to operate stand     ..............           ..............           ..............
     pipe.                                                                                                      
    Training to operate mud room  ..............           ..............  ..............  ..............
     valves.                                                                                                    
2. Care, handling &                                 ..............  ..............  ..............
 characteristics of drilling &                                                                                  
 completion fluids.                                                                                             
3. Care, handling &               ..............  ..............                           
 characteristics of well                                                                                        
 completion/well workover fluids                                                                                
 & packer fluids.                                                                                               
4. Major causes of uncontrolled                                                                                 
 fluids from a well including:                                                                                  
    Failure to keep the hole               ..............           ..............  ..............
     full.                                                                                                      
    Swabbing effect.............           ..............           ..............  ..............
    Loss of circulation.........           ..............           ..............  ..............
    Insufficient drilling fluid            ..............           ..............  ..............
     density.                                                                                                   
    Abnormally pressured                   ..............           ..............  ..............
     formations.                                                                                                
    Effect of too rapidly                  ..............           ..............  ..............
     lowering of the pipe in the                                                                                
     hole.                                                                                                      
5. Importance & instructions of            ..............           ..............  ..............
 measuring the volume of fluid                                                                                  
 to fill the hole during trips.                                                                                 
6. Importance & instructions of            ..............  ..............  ..............  ..............
 measuring the volume of fluid                                                                                  
 to fill the hole during trips                                                                                  
 including the importance of                                                                                    
 filing the hole as it relates                                                                                  
 to shallow gas conditions.                                                                                     

[[Page 366]]

                                                                                                                
7. Filling the tubing & casing    ..............  ..............  ..............           ..............
 with fluid to control                                                                                          
 bottomhole pressure.                                                                                           
8. Warning signals that indicate                                      ..............
 kick & conditions that lead to                                                                                 
 a kick.                                                                                                        
9. Controlling shallow gas kicks           ..............  ..............  ..............  ..............
 and using diverters.                                                                                           
10. At least one bottomhole                ..............           ..............  ..............
 pressure well control method                                                                                   
 including conditions unique to                                                                                 
 a surface subsea BOP stack.                                                                                    
11. Installing, operating,                 ..............  ..............  ..............  ..............
 maintaining & testing BOP &                                                                                    
 diverter systems.                                                                                              
12. Installing, operating,        ..............  ..............           ..............  ..............
 maintaining & testing BOP                                                                                      
 systems.                                                                                                       
13. Government regulations on:                                                                                  
    Emergency shutdown systems..  ..............  ..............  ..............  ..............         
    Production safety systems...  ..............  ..............  ..............  ..............         
    Drilling procedures.........           ..............  ..............  ..............  ..............
    Wellbore plugging &                    ..............           ..............         
     abandonment.                                                                                               
    Pollution prevention & waste                                             
     management.                                                                                                
    Well completion & well        ..............  ..............           ..............         
     workover requirements                                                                                      
     (Subparts E & F of 30 CFR                                                                                  
     part 250).                                                                                                 
14. Procedures & sequentials                                                                                    
 steps for shutting in a well:                                                                                  
    BOP system..................           ..............           ..............         
    Surface/subsurface safety     ..............  ..............  ..............  ..............         
     system.                                                                                                    
    Choke manifold..............           ..............           ..............  ..............
15. Well control exercises with   ..............  ..............           ..............  ..............
 a simulator suitable for                                                                                       
 modeling well completion/well                                                                                  
 workover.                                                                                                      
16. Well control exercises with            ..............  ..............  ..............  ..............
 a simulator suitable for                                                                                       
 modeling drilling.                                                                                             
17. Instructions & simulator or            ..............           ..............  ..............
 test well experience on                                                                                        
 organizing & directing a well                                                                                  
 killing operation.                                                                                             
18. At least two simulator                 ..............           ..............  ..............
 practice problems (rotate the                                                                                  
 trainees & have teams of 3 or                                                                                  
 less members).                                                                                                 
19. Care, operation, & purpose                                        ..............
 [& installation (for                                                                                           
 supervisors)] of the well                                                                                      
 control equipment.                                                                                             
20. Limitations of the equipment           ..............           ..............         
 that may wear or be subjected                                                                                  
 to pressure.                                                                                                   
21. Instructions in well control                                                                                
 equipment, including:                                                                                          
    Surface equipment...........           ..............           ..............         
    Well completion/well                   ..............           ..............         
     workover, BOP & tree                                                                                       
     equipment.                                                                                                 
    Downhole tools & tubulars...           ..............           ..............  ..............
    Tubing hanger, back pressure           ..............  ..............  ..............         
     valve (threaded/profile),                                                                                  
     landing nipples, lock                                                                                      
     mandrels for corresponding                                                                                 
     nipples & operational                                                                                      
     procedures for each, gas                                                                                   
     lift equipment & running &                                                                                 
     pulling tools operation.                                                                                   
    Packers.....................           ..............           ..............  ..............
22. Instructions in special                                                                                     
 tools & systems, such as:                                                                                      
    Automatic shutdown systems    ..............  ..............  ..............  ..............         
     (control points, activator                                                                                 
     pilots, monitor pilots,                                                                                    
     control manifolds &                                                                                        
     subsurface systems).                                                                                       
    Flow string systems (tubing,  ..............  ..............  ..............  ..............         
     mandrels & nipples, flow                                                                                   
     couplings, blast joints, &                                                                                 
     sliding sleeves).                                                                                          
    Pumpdown equipment (purpose,  ..............  ..............  ..............  ..............         
     applications, requirements,                                                                                
     surface circulating                                                                                        
     systems, entry loops & tree                                                                                
     connection/flange).                                                                                        
23. Instructions for detecting             ..............  ..............  ..............  ..............
 entry into abnormally pressured                                                                                
 formations & warning signals.                                                                                  
24. Instructions on well                   ..............  ..............  ..............  ..............
 completion/well control                                                                                        
 problems.                                                                                                      
25. Well control problems during                                                                                
 well completion/well workover                                                                                  
 including:                                                                                                     
    Killing a flow..............  ..............  ..............           ..............  ..............
    Simultaneous drilling,        ..............  ..............           ..............  ..............
     completion & workover                                                                                      
     operations on the same                                                                                     
     platform.                                                                                                  
    Killing a producing well....  ..............  ..............           ..............  ..............
    Removing the tree...........  ..............  ..............           ..............  ..............
26. Calculations on the                                                                                         
 following:                                                                                                     
    Fluid density increase that            ..............           ..............  ..............
     controls fluid flow into                                                                                   
     the wellbore.                                                                                              

[[Page 367]]

                                                                                                                
    Fluid density to pressure              ..............  ..............  ..............  ..............
     conversion & the danger of                                                                                 
     formation breakdown under                                                                                  
     the pressure caused by the                                                                                 
     fluid column especially                                                                                    
     when setting casing in                                                                                     
     shallow formations.                                                                                        
    Fluid density to pressure     ..............  ..............           ..............  ..............
     conversion & the danger of                                                                                 
     formation breakdown under                                                                                  
     the pressure caused by                                                                                     
     fluid column.                                                                                              
    Equivalent pressures at the            ..............  ..............  ..............  ..............
     casing seat depth.                                                                                         
    Drop in pump pressure as               ..............           ..............  ..............
     fluid density increases; &                                                                                 
     the relationship between                                                                                   
     pump pressure, pump rate, &                                                                                
     fluid density.                                                                                             
    Pressure limitations on                ..............           ..............  ..............
     casings.                                                                                                   
    Hydrostatic pressure &                 ..............           ..............  ..............
     pressure gradient.                                                                                         
27. Unusual well control                                                                                        
 situations, including the                                                                                      
 following:                                                                                                     
    Drill pipe is off the bottom           ..............           ..............  ..............
     or out of the hole/work                                                                                    
     string is off the bottom or                                                                                
     out of the hole.                                                                                           
    Lost circulation occurs.....           ..............           ..............  ..............
    Drill pipe is plugged/work             ..............           ..............  ..............
     string is plugged.                                                                                         
    There is excessive casing              ..............           ..............  ..............
     pressure.                                                                                                  
    There is a hole in drill               ..............           ..............  ..............
     pipe/hole in the work                                                                                      
     string/hole in the casing                                                                                  
     string.                                                                                                    
    Multiple completions in the   ..............  ..............           ..............  ..............
     hole.                                                                                                      
28. Special well-control                                                                                        
 problems-drilling with a subsea                                                                                
 stack (subsea students)                                                                                        
 includes:                                                                                                      
    Choke line friction                    ..............           ..............  ..............
     determinations.                                                                                            
    Using marine risers.........           ..............           ..............  ..............
    Riser collapse..............           ..............           ..............  ..............
    Removing trapped gas from              ..............           ..............  ..............
     the BOP stack after                                                                                        
     controlling a well kick.                                                                                   
    ``U'' tube effect as gas               ..............           ..............  ..............
     hits the choke line.                                                                                       
29. Mechanics of various well                                                                                   
 controlled situations,                                                                                         
 including:                                                                                                     
    Gas bubble migration &                 ..............           ..............  ..............
     expansion.                                                                                                 
    Bleeding volume from a shut-           ..............           ..............  ..............
     in well during gas                                                                                         
     migration.                                                                                                 
    Excessive annular surface              ..............           ..............  ..............
     pressure.                                                                                                  
    Differences between a gas              ..............           ..............  ..............
     kick & a salt water and/or                                                                                 
     oil kick.                                                                                                  
    Special well control                   ..............           ..............  ..............
     techniques (such as, but                                                                                   
     not limited to, barite                                                                                     
     plugs & cement plugs).                                                                                     
    Procedures & problems                  ..............           ..............  ..............
     involved when experiencing                                                                                 
     lost circulation.                                                                                          
    Procedures & problems                  ..............           ..............         
     involved when experiencing                                                                                 
     a kick while drilling in a                                                                                 
     hydrogen sulfide (H2S)                                                                                     
     environment.                                                                                               
    Procedures & problems--                ..............           ..............  ..............
     experiencing a kick during                                                                                 
     snubbing, coil-tubing, or                                                                                  
     small tubing operations and                                                                                
     stripping & snubbing                                                                                       
     operations with work string.                                                                               
30. Reasons for well completion/                                                                                
 well workover, including:                                                                                      
    Reworking a reservoir to      ..............  ..............           ..............         
     control production.                                                                                        
    Water coning................  ..............  ..............           ..............  ..............
    Completing from a new         ..............  ..............           ..............         
     reservoir.                                                                                                 
    Completing multiple           ..............  ..............           ..............         
     reservoirs.                                                                                                
    Stimulating to increase       ..............  ..............           ..............         
     production.                                                                                                
    Repairing mechanical failure  ..............  ..............           ..............         
31. Methods on preparing a well                                                                                 
 for entry:                                                                                                     
    Using back pressure valves..  ..............  ..............           ..............  ..............
    Using surface & subsurface    ..............  ..............           ..............         
     safety systems.                                                                                            
    Removing the tree & tubing    ..............  ..............                           
     hangar.                                                                                                    
    Installing & testing BOP &    ..............  ..............           ..............         
     wellhead prior to removing                                                                                 
     back pressure valves &                                                                                     
     tubing plugs.                                                                                              
32. Instructions in small tubing                                                                                
 units:                                                                                                         
    Applications (stimulation     ..............  ..............           ..............  ..............
     operations, cleaning out                                                                                   
     tubing obstructions, and                                                                                   
     plugback and squeeze                                                                                       
     cementing).                                                                                                
    Equipment description         ..............  ..............           ..............  ..............
     (derrick & drawworks, small                                                                                
     tubing, pumps, weighted                                                                                    
     fluid facilities, and                                                                                      
     weighted fluids).                                                                                          

[[Page 368]]

                                                                                                                
    BOP equipment (rams,          ..............  ..............           ..............  ..............
     wellhead connection, and                                                                                   
     check valve).                                                                                              
33. Methods for killing a                                                                                       
 producing well, including:                                                                                     
    Bullheading.................  ..............  ..............           ..............         
    Lubricating & bleeding......  ..............  ..............           ..............         
    Coil tubing.................  ..............  ..............           ..............         
    Applications (stimulation     ..............  ..............  ..............  ..............         
     operations, initiating                                                                                     
     flow, & cleaning out sand                                                                                  
     in tubing).                                                                                                
    Equipment description (coil   ..............  ..............  ..............  ..............         
     tubing, reel, injecting                                                                                    
     head, control assembly &                                                                                   
     injector hoist).                                                                                           
    BOP equipment (tree           ..............  ..............  ..............  ..............         
     connection or flange, rams,                                                                                
     injector assembly &                                                                                        
     circulating system).                                                                                       
    Snubbing....................  ..............  ..............           ..............         
    Types (rig assist & stand     ..............  ..............  ..............  ..............         
     alone).                                                                                                    
    Applications (running &       ..............  ..............  ..............  ..............         
     pulling production or kill                                                                                 
     strings, resetting weight                                                                                  
     on packers, fishing for                                                                                    
     lost wireline tools or                                                                                     
     parted kill strings &                                                                                      
     circulating cement or                                                                                      
     fluid).                                                                                                    
    Equipment (operating          ..............  ..............  ..............  ..............         
     mechanism, power supply,                                                                                   
     control assembly & basket,                                                                                 
     slip assembly, mast &                                                                                      
     counterbalance winch &                                                                                     
     access window).                                                                                            
    BOP equipment (tree           ..............  ..............  ..............  ..............         
     connection or flange, rams,                                                                                
     spool, traveling slips,                                                                                    
     manifolds, auxiliary--full                                                                                 
     opening safety valve inside                                                                                
     BOP, maintenance & testing).                                                                               
34. The purpose & use of BOP                                                                                    
 closing units, including the                                                                                   
 following:                                                                                                     
    Charging procedures include            ..............           ..............  ..............
     precharge & operating                                                                                      
     pressure.                                                                                                  
    Fluid volumes (useable &               ..............           ..............  ..............
     required).                                                                                                 
    Fluid pumps.................           ..............           ..............  ..............
    Maintenance that includes              ..............           ..............  ..............
     charging fluid & inspection                                                                                
     procedures.                                                                                                
35. Instructions on stripping &            ..............  ..............  ..............  ..............
 snubbing operators & using the                                                                                 
 BOP system for working pipe in                                                                                 
 or out of a wellbore under                                                                                     
 pressure.                                                                                                      
----------------------------------------------------------------------------------------------------------------


                  Table (b)--Production Safety Systems                  
------------------------------------------------------------------------
                                                                        
-------------------------------------------------------------------------
1. Government Regulations:                                              
    Pollution prevention & waste management                             
    Requirements for well completion/well workover operations           
2. Instructions in the following: (contained in, but not limited to, API
 RP 14C):                                                               
    Failures or malfunctions in systems that cause abnormal conditions &
     the detection of abnormal conditions                               
    Primary & secondary protection devices & procedures                 
    Safety devices that control undesirable events                      
    Safety analysis concepts                                            
    Safety analysis of each basic production process component          
    Protection concepts                                                 
3. Hands on training on safety devices covering, installing, operating, 
 repairing or maintaining equipment:                                    
    High-low pressure sensors                                           
    High-low level sensors                                              
    Combustible gas detectors                                           
    Pressure relief devices                                             
    Flow line check valves                                              
    Surface safety valves                                               
    Shutdown valves                                                     
    Fire (flame, heat, or smoke) detectors                              
    Auxiliary devices (3-way block & bleed valves, time relays, 3-way   
     snap acting valves, etc.)                                          
    Surface-controlled subsurface safety valves &/or surface-control    
     equipment                                                          
    Subsurface-controlled subsurface safety valves                      
4. Instructions on inspecting, testing & maintaining surface &          
 subsurface devices & surface control systems for subsurface safety     
 valves                                                                 
5. Instructions in at least one safety device that illustrates the      
 primary operation principle in each class for safety devices:          

[[Page 369]]

                                                                        
    Basic operations principles                                         
    Limits affecting application                                        
    Problems causing equipment malfunction & how to correct these       
     problems                                                           
    A test for proper actuation point & operation                       
    Adjustments or calibrations                                         
    Recording inspection results & malfunctions                         
    Special techniques for installing safety devices                    
6. Instructions on the basic principle & logic of the emergency support 
 system:                                                                
    Combustible & toxic gas detection system                            
    Liquid containment system                                           
    Fire loop System                                                    
    Other fire detection systems                                        
    Emergency shutdown system                                           
    Subsurface safety valves                                            
--------------------------------------------------------------------

[62 FR 5326, Feb. 5, 1997, as amended at 62 FR 7298, Feb. 18, 1997]



Sec. 250.230  If MMS tests employees at my worksite, what must I do?

    (a) You must allow MMS to test employees at your worksite.
    (b) You must identify your employees by:
    (1) Current job classification;
    (2) Name of the operator;
    (3) Name of the most recent basic or advanced course taken by your 
employees for their current job; and
    (4) Name of the training organization.
    (c) You must correct any deficiencies found by MMS. Steps for 
correcting deficiencies may include:
    (1) Isolating problems by doing more testing; and
    (2) Reassigning employees or conducting training (MMS will not 
identify the employees it tests).



Sec. 250.231  If MMS test trainees at a training organization's facility, what must occur?

    (a) Training organizations must allow MMS to test trainees.
    (b) The trainee must pass the MMS-conducted test or a retest in 
order for MMS to consider that the trainee completed the training.



Sec. 250.232  Why might MMS conduct its own tests?

    MMS needs to identify the effectiveness of a training program that 
provides for safe and clean operations.



Sec. 250.233  Can a training organization lose its accreditation?

    Yes, an accredited organization can lose its accreditation. MMS may 
revoke or suspend an organization's accreditation for noncompliance with 
regulations or conditions of its accredited program, or assess civil 
penalties under subpart N of this part.



                      Subpart P--Sulphur Operations

    Source: 56 FR 32100, July 15, 1991, unless otherwise noted.



Sec. 250.250  Performance standard.

    Operations to discover, develop, and produce sulphur in the OCS 
shall be in accordance with an approved Exploration Plan or Development 
and Production Plan and shall be conducted in a manner to protect 
against harm or damage to life (including fish and other aquatic life), 
property, natural resources of the OCS including any mineral deposits 
(in areas leased or not leased), the national security or defense, and 
the marine, coastal, or human environment.



Sec. 250.251  Definitions.

    Terms used in this subpart shall have the meanings as defined below:
    Air line means a tubing string that is used to inject air within a 
sulphur producing well to airlift sulphur out of the well.
    Bleedwater means a mixture of mine water or booster water and 
connate water that is produced by a bleedwell.

[[Page 370]]

    Bleedwell means a well drilled into a producing sulphur deposit that 
is used to control the mine pressure generated by the injection of mine 
water.
    Brine means the water containing dissolved salt obtained from a 
brine well by circulating water into and out of a cavity in the salt 
core of a salt dome.
    Brine well means a well drilled through cap rock into the core at a 
salt dome for the purpose of producing brine.
    Cap rock means the rock formation, a body of limestone, anhydride, 
and/or gypsum, overlying a salt dome.
    Sulphur deposit means a formation of rock that contains elemental 
sulphur.
    Sulphur production rate means the number of long tons of sulphur 
produced during a certain period of time, usually per day.



Sec. 250.252  Applicability.

    (a) The requirements of this subpart P are applicable to all 
exploration, development, and production operations under an OCS sulphur 
lease. Sulphur operations include all activities conducted under a lease 
for the purpose of discovery or delineation of a sulphur deposit and for 
the development and production of elemental sulphur. Sulphur operations 
also include activities conducted for related purposes. Activities 
conducted for related purposes include, but are not limited to, 
production of other minerals, such as salt, for use in the exploration 
for or the development and production of sulphur. The lessee must have 
obtained the right to produce and/or use these other minerals.
    (b) Lessees conducting sulphur operations in the OCS shall comply 
with the requirements of the applicable provisions of subparts A, B, C, 
G, I, J, M, N, and O of this part.
    (c) Lessees conducting sulphur operations in the OCS are also 
required to comply with the requirements in the applicable provisions of 
subparts D, E, F, H, K, and L of this part where such provisions 
specifically are referenced in this subpart.



Sec. 250.253  Determination of sulphur deposit.

    (a) Upon receipt of a written request from the lessee, the District 
Supervisor will determine whether a sulphur deposit has been defined 
that contains sulphur in paying quantities (i.e., sulphur in quantities 
sufficient to yield a return in excess of the costs, after completion of 
the wells, of producing minerals at the wellheads).
    (b) A determination under paragraph (a) of this section shall be 
based upon the following:
    (1) Core analyses that indicate the presence of a producible sulphur 
deposit (including an assay of elemental sulphur);
    (2) An estimate of the amount of recoverable sulphur in long tons 
over a specified period of time; and
    (3) Contour map of the cap rock together with isopach map showing 
the extent and estimated thickness of the sulphur deposit.



Sec. 250.254  General requirements.

    Sulphur lessees shall comply with requirements of this section when 
conducting well-drilling, well-completion, well-workover, or production 
operations.
    (a) Equipment movement. The movement of well-drilling, well-
completion, or well-workover rigs and related equipment on and off an 
offshore platform, or from one well to another well on the same offshore 
platform, including rigging up and rigging down, shall be conducted in a 
safe manner.
    (b) Hydrogen sulfide (H2S). When a drilling, well-
completion, well-workover, or production operation is being conducted on 
a well in zones known to contain H2S or in zones where the 
presence of H2S is unknown (as defined in 30 CFR 250.67 of 
this part), the lessee shall take appropriate precautions to protect 
life and property, especially during operations such as dismantling 
wellhead equipment and flow lines and circulating the well. The lessee 
shall also take appropriate precautions when H2S is generated 
as a result of sulphur production operations. The lessee shall comply 
with the requirements in Sec. 250.67 of this part as

[[Page 371]]

well as the requirements of this subpart.
    (c) Welding and burning practices and procedures. All welding, 
burning, and hot-tapping activities involved in drilling, well-
completion, well-workover or production operations shall be conducted 
with properly maintained equipment, trained personnel, and appropriate 
procedures in order to minimize the danger to life and property 
according to the specific requirements in Sec. 250.52 of this part.
    (d) Electrical requirements. All electrical equipment and systems 
involved in drilling, well-completion, well-workover, and production 
operations shall be designed, installed, equipped, protected, operated, 
and maintained so as to minimize the danger to life and property in 
accordance with the requirements of Sec. 250.53 of this part.
    (e) Structures on fixed OCS platforms. Derricks, cranes, masts, 
substructures, and related equipment shall be selected, designed, 
installed, used, and maintained so as to be adequate for the potential 
loads and conditions of loading that may be encountered during the 
operations. Prior to moving equipment such as a well-drilling, well-
completion, or well-workover rig or associated equipment or production 
equipment onto a platform, the lessee shall determine the structural 
capability of the platform to safely support the equipment and 
operations, taking into consideration corrosion protection, platform 
age, and previous stresses.
    (f) Traveling-block safety device. After August 14, 1992, all 
drilling units being used for drilling, well-completion, or well-
workover operations that have both a traveling block and a crown block 
shall be equipped with a safety device that is designed to prevent the 
traveling block from striking the crown block. The device shall be 
checked for proper operation weekly and after each drill-line slipping 
operation. The results of the operational check shall be entered in the 
operations log.



Sec. 250.260  Drilling requirements.

    (a) Lessees of OCS sulphur leases shall conduct drilling operations 
in accordance with Secs. 250.260 through 250.274 of this subpart and 
with other requirements of this part, as appropriate.
    (b) Fitness of drilling unit. (1) Drilling units shall be capable of 
withstanding the oceanographic and meteorological conditions for the 
proposed season and location of operations.
    (2) Prior to commencing operation, drilling units shall be made 
available for a complete inspection by the District Supervisor.
    (3) The lessee shall provide information and data on the fitness of 
the drilling unit to perform the proposed drilling operation. The 
information shall be submitted with, or prior to, the submission of Form 
MMS-123, Application for Permit to Drill (APD), in accordance with 
Sec. 250.272 of this subpart. After a drilling unit has been approved by 
an MMS district office, the information required in this paragraph need 
not be resubmitted unless required by the District Supervisor or there 
are changes in the equipment that affect the rated capacity of the unit.
    (c) Oceanographic, meteorological, and drilling unit performance 
data. Where oceanographic, meteorological, and drilling unit performance 
data are not otherwise readily available, lessees shall collect and 
report such data upon request to the District Supervisor. The type of 
information to be collected and reported will be determined by the 
District Supervisor in the interests of safety in the conduct of 
operations and the structural integrity of the drilling unit.
    (d) Foundation requirements. When the lessee fails to provide 
sufficient information pursuant to Secs. 250.33 and 250.34 of this part 
to support a determination that the seafloor is capable of supporting a 
specific bottom-founded drilling unit under the site-specific soil and 
oceanographic conditions, the District Supervisor may require that 
additional surveys and soil borings be performed and the results 
submitted for review and evaluation by the District Supervisor before 
approval is granted for commencing drilling operations.
    (e) Tests, surveys, and samples. (1) Lessees shall drill and take 
cores and/or run well and mud logs through the objective interval to 
determine the presence, quality, and quantity of sulphur

[[Page 372]]

and other minerals (e.g., oil and gas) in the cap rock and the outline 
of the commercial sulphur deposit.
    (2) Inclinational surveys shall be obtained on all vertical wells at 
intervals not exceeding 1,000 feet during the normal course of drilling. 
Directional surveys giving both inclination and azimuth shall be 
obtained on all directionally drilled wells at intervals not exceeding 
500 feet during the normal course of drilling and at intervals not 
exceeding 200 feet in all planned angle-change portions of the borehole.
    (3) Directional surveys giving both inclination and azimuth shall be 
obtained on both vertically and directionally drilled wells at intervals 
not exceeding 500 feet prior to or upon setting a string of casing, or 
production liner, and at total depth. Composite directional surveys 
shall be prepared with the interval shown from the bottom of the 
conductor casing. In calculating all surveys, a correction from the true 
north to Universal-Transverse-Mercator-Grid-north or Lambert-Grid-north 
shall be made after making the magnetic-to-true-north correction. A 
composite dipmeter directional survey or a composite measurement while-
drilling directional survey will be acceptable as fulfilling the 
applicable requirements of this paragraph.
    (4) Wells are classified as vertical if the calculated average of 
inclination readings weighted by the respective interval lengths between 
readings from surface to drilled depth does not exceed 3 degrees from 
the vertical. When the calculated average inclination readings weighted 
by the length of the respective interval between readings from the 
surface to drilled depth exceeds 3 degrees, the well is classified as 
directional.
    (5) At the request of a holder of an adjoining lease, the Regional 
Supervisor may, for the protection of correlative rights, furnish a copy 
of the directional survey to that leaseholder.
    (f) Fixed drilling platforms. Applications for installation of fixed 
drilling platforms or structures including artificial islands shall be 
submitted in accordance with the provisions of subpart I, Platforms and 
Structures, of this part. Mobile drilling units that have their jacking 
equipment removed or have been otherwise immobilized are classified as 
fixed bottom founded drilling platforms.
    (g) Crane operations. Cranes installed on fixed bottom-founded 
platforms shall be operated and maintained in accordance with the 
provisions of American Petroleum Institute (API) Recommended Practice 
(RP) for Operation and Maintenance of Offshore Cranes (API RP 2D) to 
ensure the safety of facility operations. Records of inspection, 
testing, maintenance, and crane operator qualifications in accordance 
with the provisions of API RP 2D shall be kept by the lessee at the 
lessee's field office nearest the OCS facility for a period of 2 years.
    (h) Diesel-engine air intakes. After August 14, 1992, diesel-engine 
air intakes shall be equipped with a device to shut down the diesel 
engine in the event of runaway. Diesel engines that are continuously 
attended shall be equipped with either remote-operated manual or 
automatic-shutdown devices. Diesel engines that are not continuously 
attended shall be equipped with automatic shutdown devices.

[56 FR 32100, July 15, 1991, as amended at 58 FR 49928, Sept. 24, 1993]



Sec. 250.261  Control of wells.

    The lessee shall take necessary precautions to keep its wells under 
control at all times. Operations shall be conducted in a safe and 
workmanlike manner. The lessee shall utilize the best available and 
safest drilling technologies and state-of-the-art methods to evaluate 
and minimize the potential for a well to flow or kick. The lessee shall 
utilize personnel who are trained and competent and shall utilize and 
maintain equipment and materials necessary to assure the safety and 
protection of personnel, equipment, natural resources, and the 
environment.



Sec. 250.262  Field rules.

    When geological and engineering information in a field enables a 
District Supervisor to determine specific operating requirements, field 
rules may be established for drilling, well completion, or well workover 
on the District Supervisor's initiative or in response to a request from 
a lessee; such rules may modify the specific requirements

[[Page 373]]

of this subpart. After field rules have been established, operations in 
the field shall be conducted in accordance with such rules and other 
requirements of this subpart. Field rules may be amended or canceled for 
cause at any time upon the initiative of the District Supervisor or upon 
the request of a lessee.



Sec. 250.263  Well casing and cementing.

    (a) General requirements. (1) For the purpose of this subpart, the 
several casing strings in order of normal installation are:
    (i) Drive or structural,
    (ii) Conductor,
    (iii) Cap rock casing,
    (iv) Bobtail cap rock casing (required when the cap rock casing does 
not penetrate into the cap rock),
    (v) Second cap rock casing (brine wells), and
    (vi) Production liner.
    (2) The lessee shall case and cement all wells with a sufficient 
number of strings of casing cemented in a manner necessary to prevent 
release of fluids from any stratum through the wellbore (directly or 
indirectly) into the sea, protect freshwater aquifers from 
contamination, support unconsolidated sediments, and otherwise provide a 
means of control of the formation pressures and fluids. Cement 
composition, placement techniques, and waiting time shall be designed 
and conducted so that the cement in place behind the bottom 500 feet of 
casing or total length of annular cement fill, if less, attains a 
minimum compressive strength of 160 pounds per square inch (psi).
    (3) The lessee shall install casing designed to withstand the 
anticipated stresses imposed by tensile, compressive, and buckling 
loads; burst and collapse pressures; thermal effects; and combinations 
thereof. Safety factors in the drilling and casing program designs shall 
be of sufficient magnitude to provide well control during drilling and 
to assure safe operations for the life of the well.
    (4) In cases where cement has filled the annular space back to the 
mud line, the cement may be washed out or displaced to a depth not 
exceeding the depth of the structural casing shoe to facilitate casing 
removal upon well abandonment if the District Supervisor determines that 
subsurface protection against damage to freshwater aquifers and against 
damage caused by adverse loads, pressures, and fluid flows is not 
jeopardized.
    (5) If there are indications of inadequate cementing (such as lost 
returns, cement channeling, or mechanical failure of equipment), the 
lessee shall evaluate the adequacy of the cementing operations by 
pressure testing the casing shoe. If the test indicates inadequate 
cementing, the lessee shall initiate remedial action as approved by the 
District Supervisor. For cap rock casing, the test for adequacy of 
cementing shall be the pressure testing of the annulus between the cap 
rock and the conductor casings. The pressure shall not exceed 70 percent 
of the burst pressure of the conductor casing or 70 percent of the 
collapse pressure of the cap rock casing.
    (b) Drive or structural casing. This casing shall be set by driving, 
jetting, or drilling to a minimum depth of 100 feet below the mud line 
or such other depth, as may be required or approved by the District 
Supervisor, in order to support unconsolidated deposits and to provide 
hole stability for initial drilling operations. If this portion of the 
hole is drilled, a quantity of cement sufficient to fill the annular 
space back to the mud line shall be used.
    (c) Conductor and cap rock casing setting and cementing 
requirements. (1) Conductor and cap rock casing design and setting 
depths shall be based upon relevant engineering and geologic factors 
including the presence or absence of hydrocarbons, potential hazards, 
and water depths. The proposed casing setting depths may be varied, 
subject to District Supervisor approval, to permit the casing to be set 
in a competent formation or through formations determined desirable to 
be isolated from the wellbore by casing for safer drilling operations. 
However, the conductor casing shall be set immediately prior to drilling 
into formations known to contain oil or gas or, if unknown, upon 
encountering such formations. Cap rock casing shall be set and cemented 
through formations known to contain

[[Page 374]]

oil or gas or, if unknown, upon encountering such formations. Upon 
encountering unexpected formation pressures, the lessee shall submit a 
revised casing program to the District Supervisor for approval.
    (2) Conductor casing shall be cemented with a quantity of cement 
that fills the calculated annular space back to the mud line. Cement 
fill shall be verified by the observation of cement returns. In the 
event that observation of cement returns is not feasible, additional 
quantities of cement shall be used to assure fill to the mud line.
    (3) Cap rock casing shall be cemented with a quantity of cement that 
fills the calculated annular space to at least 200 feet inside the 
conductor casing. When geologic conditions such as near surface 
fractures and faulting exist, cap rock casing shall be cemented with a 
quantity of cement that fills the calculated annular space to the mud 
line, unless otherwise approved by the District Supervisor. In brine 
wells, the second cap rock casing shall be cemented with a quantity of 
cement that fills the calculated annular space to at least 200 feet 
above the setting depth of the first cap rock casing.
    (d) Bobtail cap rock casing setting and cementing requirements. (1) 
Bobtail cap rock casing shall be set on or just in cap rock and lapped a 
minimum of 100 feet into the previous casing string.
    (2) Sufficient cement shall be used to fill the annular space to the 
top of the bobtail cap rock casing.
    (e) Production liner setting and cementing requirements. (1) 
Production liners for sulphur wells and bleedwells shall be set in cap 
rock at or above the bottom of the open hole (hole that is open in cap 
rock, below the bottom of the cap rock casing) and lapped into the 
previous casing string or to the surface. For brine wells, the liner 
shall be set in salt and lapped into the previous casing string or to 
the surface.
    (2) The production liner is not required to be cemented unless the 
cap rock contains oil or gas. If the cap rock contains oil or gas, 
sufficient cement shall be used to fill the annular space to the top of 
the production liner.



Sec. 250.264  Pressure testing of casing.

    (a) Prior to drilling the plug after cementing, all casing strings, 
except the drive or structural casing, shall be pressure tested. The 
conductor casing shall be tested to at least 200 psi. All casing strings 
below the conductor casing shall be tested to 500 psi or 0.22 psi/ft, 
whichever is greater. (When oil or gas is not present in the cap rock, 
the production liner need not be cemented in place; thus, it would not 
be subject to pressure testing.) If the pressure declines more than 10 
percent in 30 minutes or if there is another indication of a leak, the 
casing shall be recemented, repaired, or an additional casing string run 
and the casing tested again. The above procedures shall be repeated 
until a satisfactory test is obtained. The time, conditions of testing, 
and results of all casing pressure tests shall be recorded in the 
driller's report.
    (b) After cementing any string of casing other than structural, 
drilling shall not be resumed until there has been a timelapse of at 
least 8 hours under pressure for the conductor casing string or 12 hours 
under pressure for all other casing strings. Cement is considered under 
pressure if one or more float valves are shown to be holding the cement 
in place or when other means of holding pressure are used.



Sec. 250.265  Blowout preventer systems and system components.

    (a) General. The blowout preventer (BOP) systems and system 
components shall be designed, installed, used, maintained, and tested to 
assure well control.
    (b) BOP stacks. The BOP stacks shall consist of an annular preventer 
and the number of ram-type preventers as specified under paragraphs (e) 
and (f) of this section. The pipe rams shall be of proper size to fit 
the drill pipe in use.
    (c) Working pressure. The working-pressure rating of any BOP shall 
exceed the surface pressure to which it may be anticipated to be 
subjected.
    (d) BOP equipment. All BOP systems shall be equipped and provided 
with the following:
    (1) An accumulator system that provides sufficient capacity to 
supply 1.5 times the volume necessary to close and hold closed all BOP 
equipment

[[Page 375]]

units with a minimum pressure of 200 psi above the precharge pressure, 
without assistance from a charging system. After February 14, 1992, 
accumulator regulators supplied by rig air, which do not have a 
secondary source of pneumatic supply, shall be equipped with manual 
overrides or other devices alternately provided to ensure capability of 
hydraulic operations if rig air is lost.
    (2) An automatic backup to the accumulator system. The backup system 
shall be supplied by a power source independent from the power source to 
the primary accumulator system. The automatic backup system shall 
possess sufficient capability to close the BOP and hold it closed.
    (3) At least one operable remote BOP control station in addition to 
the one on the drilling floor. This control station shall be in a 
readily accessible location away from the drilling floor.
    (4) A drilling spool with side outlets, if side outlets are not 
provided in the body of the BOP stack, to provide for separate kill and 
choke lines.
    (5) A choke line and a kill line each equipped with two full-opening 
valves. At least one of the valves on the choke line and one valve on 
the kill line shall be remotely controlled, except that a check valve 
may be installed on the kill line in lieu of the remotely controlled 
valve, provided that two readily accessible manual valves are in place 
and the check valve is placed between the manual valve and the pump.
    (6) A fill-up line above the uppermost preventer.
    (7) A choke manifold designed with consideration of anticipated 
pressures to which it may be subjected, method of well control to be 
employed, surrounding environment, and corrosiveness, volume, and 
abrasiveness of fluids. The choke manifold shall also meet the following 
requirements:
    (i) Manifold and choke equipment subject to well and/or pump 
pressure shall have a rated working pressure at least as great as the 
rated working pressure of the ram-type BOP's or as otherwise approved by 
the District Supervisor;
    (ii) All components of the choke manifold system shall be protected 
from freezing by heating, draining, or filling with proper fluids; and
    (iii) When buffer tanks are installed downstream of the choke 
assemblies for the purpose of manifolding the bleed lines together, 
isolation valves shall be installed on each line.
    (8) Valves, pipes, flexible steel hoses, and other fittings upstream 
of, and including, the choke manifold with a pressure rating at least as 
great as the rated working pressure of the ram-type BOP's unless 
otherwise approved by the District Supervisor.
    (9) A wellhead assembly with a rated working pressure that exceeds 
the pressure to which it might be subjected.
    (10) The following system components:
    (i) A kelly cock (an essentially full-opening valve) installed below 
the swivel and a similar valve of such design that it can be run through 
the BOP stack installed at the bottom of the kelly. A wrench to fit each 
valve shall be stored in a location readily accessible to the drilling 
crew;
    (ii) An inside BOP and an essentially full-opening, drill-string 
safety valve in the open position on the rig floor at all times while 
drilling operations are being conducted. These valves shall be 
maintained on the rig floor to fit all connections that are in the drill 
string. A wrench to fit the drill-string safety valve shall be stored in 
a location readily accessible to the drilling crew;
    (iii) A safety valve available on the rig floor assembled with the 
proper connection to fit the casing string being run in the hole; and
    (iv) Locking devices installed on the ram-type preventers.
    (e) BOP requirements. Prior to drilling below cap rock casing, a BOP 
system shall be installed consisting of at least three remote-
controlled, hydraulically operated BOP's including at least one equipped 
with pipe rams, one with blind rams, and one annular type.
    (f) Tapered drill-string operations. Prior to commencing tapered 
drill-string operations, the BOP stack shall be equipped with 
conventional and/or variable-bore pipe rams to provide either of the 
following:
    (1) One set of variable bore rams capable of sealing around both 
sizes in the string and one set of blind rams, or

[[Page 376]]

    (2) One set of pipe rams capable of sealing around the larger size 
string, provided that blind-shear ram capability is present, and 
crossover subs to the larger size pipe are readily available on the rig 
floor.



Sec. 250.266  Blowout preventer systems tests, actuations, inspections, and maintenance.

    (a) Prior to conducting high-pressure tests, all BOP systems shall 
be tested to a pressure of 200 to 300 psi.
    (b) Ram-type BOP's and the choke manifold shall be pressure tested 
with water to rated working pressure or as otherwise approved by the 
District Supervisor. Annular type BOP's shall be pressure tested with 
water to 70 percent of rated working pressure or as otherwise approved 
by the District Supervisor.
    (c) In conjunction with the weekly pressure test of BOP systems 
required in paragraph (d) of this section, the choke manifold valves, 
upper and lower kelly cocks, and drill-string safety valves shall be 
pressure tested to pipe-ram test pressures. Safety valves with proper 
casing connections shall be actuated prior to running casing.
    (d) BOP system shall be pressure tested as follows:
    (1) When installed;
    (2) Before drilling out each string of casing or before continuing 
operations in cases where cement is not drilled out;
    (3) At least once each week, but not exceeding 7 days between 
pressure tests, alternating between control stations. If either control 
system is not functional, further drilling operations shall be suspended 
until that system becomes operable. A period of more than 7 days between 
BOP tests is allowed when there is a stuck drill pipe or there are 
pressure control operations and remedial efforts are being performed, 
provided that the pressure tests are conducted as soon as possible and 
before normal operations resume. The date, time, and reason for 
postponing pressure testing shall be entered into the driller's report. 
Pressure testing shall be performed at intervals to allow each drilling 
crew to operate the equipment. The weekly pressure test is not required 
for blind and blind-shear rams;
    (4) Bind and blind-shear rams shall be actuated at least once every 
7 days. Closing pressure on the blind and blind-shear rams greater than 
necessary to indicate proper operation of the rams is not required;
    (5) Variable bore-pipe rams shall be pressure tested against all 
sizes of pipe in use, excluding drill collars and bottomhole tools; and
    (6) Following the disconnection or repair of any well-pressure 
containment seal in the wellhead/BOP stack assembly. In this situation, 
the pressure tests may be limited to the affected component.
    (e) All BOP systems shall be inspected and maintained to assure that 
the equipment will function properly. The BOP systems shall be visually 
inspected at least once each day. The manufacturer's recommended 
inspection and maintenance procedures are acceptable as guidelines in 
complying with this requirement.
    (f) The lessee shall record pressure conditions during BOP tests on 
pressure charts, unless otherwise approved by the District Supervisor. 
The test duration for each BOP component tested shall be sufficient to 
demonstrate that the component is effectively holding pressure. The 
charts shall be certified as correct by the operator's representative at 
the facility.
    (g) The time, date, and results of all pressure tests, actuations, 
inspections, and crew drills of the BOP system and system components 
shall be recorded in the driller's report. The BOP tests shall be 
documented in accordance with the following:
    (1) The documentation shall indicate the sequential order of BOP and 
auxiliary equipment testing and the pressure and duration of each test. 
As an alternate, the documentation in the driller's report may reference 
a BOP test plan that contains the required information and is retained 
on file at the facility.
    (2) The control station used during the test shall be identified in 
the driller's report.
    (3) Any problems or irregularities observed during BOP and auxiliary 
equipment testing and any actions taken to

[[Page 377]]

remedy such problems or irregularities shall be noted in the driller's 
report.
    (4) Documentation required to be entered in the driller's report may 
instead be referenced in the driller's report. All records, including 
pressure charts, driller's report, and referenced documents, pertaining 
to BOP tests, actuations, and inspections, shall be available for MMS 
review at the facility for the duration of the drilling activity. 
Following completion of the drilling activity, all drilling records 
shall be retained for a period of 2 years at the facility, at the 
lessee's field office nearest the OCS facility, or at another location 
conveniently available to the District Supervisor.



Sec. 250.267  Well-control drills.

    Well-control drills shall be conducted for each drilling crew in 
accordance with the requirements set forth in Sec. 250.58 of this part 
or as approved by the District Supervisor.



Sec. 250.268  Diverter systems.

    (a) When drilling a conductor or cap rock hole, all drilling units 
shall be equipped with a diverter system consisting of a diverter 
sealing element, diverter lines, and control systems. The diverter 
system shall be designed, installed, and maintained so as to divert 
gases, water, mud, and other materials away from the facilities and 
personnel.
    (b) After August 14, 1992, diverter systems shall be in compliance 
with the requirements of this section.
    The requirements applicable to diverters that were in effect 
immediately prior to August 14, 1991, shall remain in effect until 
August 14, 1992.
    (c) The diverter system shall be equipped with remote-control valves 
in the flow lines that can be operated from at least one remote-control 
station in addition to the one on the drilling floor. Any valve used in 
a diverter system shall be full opening. No manual or butterfly valves 
shall be installed in any part of a diverter system. There shall be a 
minimum number of turns in the vent line(s) downstream of the spool 
outlet flange, and the radius of curvature of turns shall be as large as 
practicable. Flexible hose may be used for diversion lines instead of 
rigid pipe if the flexible hose has integral end couplings. The entire 
diverter system shall be firmly anchored and supported to prevent 
whipping and vibrations. All diverter control equipment and lines shall 
be protected from physical damage from thrown and falling objects.
    (d) For drilling operations conducted with a surface wellhead 
configuration, the following shall apply:
    (1) If the diverter system utilizes only one spool outlet, branch 
lines shall be installed to provide downwind diversion capability, and
    (2) No spool outlet or diverter line internal diameter shall be less 
than 10 inches, except that dual spool outlets are acceptable if each 
outlet has a minimum internal diameter of 8 inches, and both outlets are 
piped to overboard lines and that each line downstream of the changeover 
nipple at the spool has a minimum internal diameter of 10 inches.
    (e) The diverter sealing element and diverter valves shall be 
pressure tested to a minimum of 200 psi when nippled upon conductor 
casing. No more than 7 days shall elapse between subsequent pressure 
tests. The diverter sealing element, diverter valves, and diverter 
control systems (including the remote) shall be actuation tested, and 
the diverter lines shall be tested for flow prior to spudding and 
thereafter at least once each 24-hour period alternating between control 
stations. All test times and results shall be recorded in the driller's 
report.



Sec. 250.269  Mud program.

    (a) The quantities, characteristics, use, and testing of drilling 
mud and the related drilling procedures shall be designed and 
implemented to prevent the loss of well control.
    (b) The lessee shall comply with requirements concerning mud 
control, mud test and monitoring equipment, mud quantities, and safety 
precautions in enclosed mud handling areas as prescribed in Sec. 250.60 
(b), (c), (d), and (e) of this part, except that the installation of an 
operable degasser in the mud system as required in Sec. 250.60(b)(8) is 
not required for sulphur operations.

[[Page 378]]



Sec. 250.270  Securing of wells.

    A downhole-safety device such as a cement plug, bridge plug, or 
packer shall be timely installed when drilling operations are 
interrupted by events such as those that force evacuation of the 
drilling crew, prevent station keeping, or require repairs to major 
drilling units or well-control equipment. The use of blind-shear rams or 
pipe rams and an inside BOP may be approved by the District Supervisor 
in lieu of the above requirements if cap rock casing has been set.



Sec. 250.271  Supervision, surveillance, and training.

    (a) The lessee shall provide onsite supervision of drilling 
operations at all times.
    (b) From the time drilling operations are initiated and until the 
well is completed or abandoned, a member of the drilling crew or the 
toolpusher shall maintain rig-floor surveillance continuously, unless 
the well is secured with BOP's, bridge plugs, packers, or cement plugs.
    (c) Lessee and drilling contractor personnel shall be trained and 
qualified in accordance with the provisions of subpart O of this part. 
Records of specific training that lessee and drilling contractor 
personnel have successfully completed, the dates of completion, and the 
names and dates of the courses shall be maintained at the drill site.



Sec. 250.272  Application for permit to drill.

    (a) Prior to commencing the drilling of a well under an approved 
Exploration Plan, Development and Production Plan, or Development 
Operations Coordination Document, the lessee shall file Form MMS-123, 
APD, with the District Supervisor for approval. Prior to commencing 
operations, written approval from the District Supervisor must be 
received by the lessee unless oral approval has been given pursuant to 
Sec. 250.6(a) of this part.
    (b) An APD shall include rated capacities of the proposed drilling 
unit and of major drilling equipment. After a drilling unit has been 
approved for use in an MMS district, the information need not be 
resubmitted unless required by the District Supervisor or there are 
changes in the equipment that affect the rated capacity of the unit.
    (c) An APD shall include a fully completed Form MMS-123 and the 
following:
    (1) A plat, drawn to a scale of 2,000 feet to the inch, showing the 
surface and subsurface location of the well to be drilled and of all the 
wells previously drilled in the vicinity from which information is 
available. For development wells on a lease, the wells previously 
drilled in the vicinity need not be shown on the plat. Locations shall 
be indicated in feet from the nearest block line;
    (2) The design criteria considered for the well and for well 
control, including the following:
    (i) Pore pressure;
    (ii) Formation fracture gradients;
    (iii) Potential lost circulation zones;
    (iv) Mud weights;
    (v) Casing setting depths;
    (vi) Anticipated surface pressures (which for purposes of this 
section are defined as the pressure that can reasonably be expected to 
be exerted upon a casing string and its related wellhead equipment). In 
the calculation of anticipated surface pressure, the lessee shall take 
into account the drilling, completion, and producing conditions. The 
lessee shall consider mud densities to be used below various casing 
strings, fracture gradients of the exposed formations, casing setting 
depths, and cementing intervals, total well depth, formation fluid type, 
and other pertinent conditions. Considerations for calculating 
anticipated surface pressure may vary for each segment of the well. The 
lessee shall include as a part of the statement of anticipated surface 
pressure the calculations used to determine this pressure during the 
drilling phase and the completion phase, including the anticipated 
surface pressure used for production string design; and
    (vii) If a shallow hazards site survey is conducted, the lessee 
shall submit with or prior to the submittal of the APD, two copies of a 
summary report describing the geological and manmade conditions present. 
The lessee shall also submit two copies of the site maps and data 
records identified in the survey strategy.

[[Page 379]]

    (3) A BOP equipment program including the following:
    (i) The pressure rating of BOP equipment,
    (ii) A schematic drawing of the diverter system to be used (plan and 
elevation views) showing spool outlet internal diameter(s); diverter 
line lengths and diameters, burst strengths, and radius of curvature at 
each turn; valve type, size, working-pressure rating, and location; the 
control instrumentation logic; and the operating procedure to be used by 
personnel, and
    (iii) A schematic drawing of the BOP stack showing the inside 
diameter of the BOP stack and the number of annular, pipe ram, variable-
bore pipe ram, blind ram, and blind-shear ram preventers.
    (4) A casing program including the following:
    (i) Casing size, weight, grade, type of connection and setting 
depth, and
    (ii) Casing design safety factors for tension, collapse, and burst 
with the assumptions made to arrive at these values.
    (5) The drilling prognosis including the following:
    (i) Estimated coring intervals,
    (ii) Estimated depths to the top of significant marker formations, 
and
    (iii) Estimated depths at which encounters with fresh water, 
sulphur, oil, gas, or abnormally pressured water are expected.
    (6) A cementing program including type and amount of cement in cubic 
feet to be used for each casing string;
    (7) A mud program including the minimum quantities of mud and mud 
materials, including weight materials, to be kept at the site;
    (8) A directional survey program for directionally drilled wells;
    (9) An H2S Contingency Plan, if applicable, and if not 
previously submitted; and
    (10) Such other information as may be required by the District 
Supervisor.
    (d) Public information copies of the APD shall be submitted in 
accordance with Sec. 250.17 of this part.

[56 FR 32100, July 15, 1991, as amended at 58 FR 49928, Sept. 24, 1993]



Sec. 250.273  Sundry notices and reports on wells.

    (a) Notices of the lessee's intention to change plans, make changes 
in major drilling equipment, deepen, sidetrack, or plug back a well, or 
engage in similar activities and subsequent reports pertaining to such 
operations shall be submitted to the District Supervisor on Form MMS-
124, Sundry Notices and Reports on Wells. Prior to commencing operations 
associated with the change, written approval must be received from the 
District Supervisor unless oral approval is obtained pursuant to 
Sec. 250.6(a) of this part.
    (b) The Form MMS-124 submittal shall contain a detailed statement of 
the proposed work that will materially change from the work described in 
the approved APD. Information submitted shall include the present state 
of the well, including the production liner and last string of casing, 
the well depth and production zone, and the well's capability to 
produce. Within 30 days after completion of the work, a subsequent 
detailed report of all the work done and the results obtained shall be 
submitted.
    (c) Public information copies of Form MMS-124 shall be submitted in 
accordance with Sec. 250.17 of this part.

[56 FR 32100, July 15, 1991, as amended at 58 FR 49928, Sept. 24, 1993]



Sec. 250.274  Well records.

    (a) Complete and accurate records for each well and all well 
operations shall be retained for a period of 2 years at the lessee's 
field office nearest the OCS facility or at another location 
conveniently available to the District Supervisor. The records shall 
contain a description of any significant malfunction or problem; all the 
formations penetrated; the content and character of sulphur in each 
formation if cored and analyzed; the kind, weight, size, grade, and 
setting depth of casing; all well logs and surveys run in the wellbore; 
and all other information required by the District Supervisor in the 
interests of resource evaluation, prevention of waste, conservation of

[[Page 380]]

natural resources, protection of correlative rights, safety of 
operations, and environmental protection.
    (b) When drilling operations are suspended or temporarily prohibited 
under the provisions of Sec. 250.10 of this part, the lessee shall, 
within 30 days after termination of the suspension or temporary 
prohibition or within 30 days after the completion of any activities 
related to the suspension or prohibition, transmit to the District 
Supervisor duplicate copies of the records of all activities related to 
and conducted during the suspension or temporary prohibition on, or 
attached to, Form MMS-125, Well Summary Report, or Form MMS-124, Sundry 
Notices and Reports on Wells, as appropriate.
    (c) Upon request by the Regional or District Supervisor, the lessee 
shall furnish the following:
    (1) Copies of the records of any of the well operations specified in 
paragraph (a) of this section;
    (2) Copies of the driller's report at a frequency as determined by 
the District Supervisor. Items to be reported include spud dates, casing 
setting depths, cement quantities, casing characteristics, mud weights, 
lost returns, and any unusual activities; and
    (3) Legible, exact copies of reports on cementing, acidizing, 
analyses of cores, testing, or other similar services.
    (d) As soon as available, the lessee shall transmit copies of logs 
and charts developed by well-logging operations, directional-well 
surveys, and core analyses. Composite logs of multiple runs and 
directional-well surveys shall be transmitted to the District Supervisor 
in duplicate as soon as available but not later than 30 days after 
completion of such operations for each well.
    (e) If the District Supervisor determines that circumstances 
warrant, the lessee shall submit any other reports and records of 
operations in the manner and form prescribed by the District Supervisor.

[56 FR 32100, July 15, 1991, as amended at 58 FR 49928, Sept. 24, 1993]



Sec. 250.280  Well-completion and well-workover requirements.

    (a) Lessees shall conduct well-completion and well-workover 
operations in sulphur wells, bleedwells, and brine wells in accordance 
with Secs. 250.280 through 250.286 of this part and other provisions of 
this part as appropriate (see Secs. 250.71 and 250.91 of this part for 
the definition of well-completion and well-workover operations).
    (b) Well-completion and well-workover operations shall be conducted 
in a manner to protect against harm or damage to life (including fish 
and other aquatic life), property, natural resources of the OCS 
including any mineral deposits (in areas leased and not leased), the 
national security or defense, or the marine, coastal, or human 
environment.



Sec. 250.281   Crew instructions.

    Prior to engaging in well-completion or well-workover operations, 
crew members shall be instructed in the safety requirements of the 
operations to be performed, possible hazards to be encountered, and 
general safety considerations to protect personnel, equipment, and the 
environment. Date and time of safety meetings shall be recorded and 
available for MMS review.



Sec. 250.282  Approvals and reporting of well-completion and well-workover operations.

    (a) No well-completion or well-workover operation shall begin until 
the lessee receives written approval from the District Supervisor. 
Approval for such operations shall be requested on Form MMS-124. 
Approvals by the District Supervisor shall be based upon a determination 
that the operations will be conducted in a manner to protect against 
harm or damage to life, property, natural resources of the OCS, 
including any mineral deposits, the national security or defense, or the 
marine, coastal, or human environment.
    (b) The following information shall be submitted with Form MMS-124 
(or with Form MMS-123):
    (1) A brief description of the well-completion or well-workover 
procedures to be followed;
    (2) When changes in existing subsurface equipment are proposed, a 
schematic drawing showing the well equipment; and
    (3) Where the well is in zones known to contain H2S or 
zones where the presence of H2S is unknown, a description

[[Page 381]]

of the safety precautions to be implemented.
    (c)(1) Within 30 days after completion, Form MMS-125, including a 
schematic of the tubing and the results of any well tests, shall be 
submitted to the District Supervisor.
    (2) Within 30 days after completing the well-workover operation, 
except routine operations, Form MMS-124 shall be submitted to the 
District Supervisor and shall include the results of any well tests and 
a new schematic of the well if any subsurface equipment has been 
changed.

[56 FR 32100, July 15, 1991, as amended at 58 FR 49928, Sept. 24, 1993]



Sec. 250.283  Well-control fluids, equipment, and operations.

    (a) Well-control fluids, equipment, and operations shall be 
designed, utilized, maintained, and/or tested as necessary to control 
the well in foreseeable conditions and circumstances, including 
subfreezing conditions. The well shall be ccntinuously monitored during 
well-completion and well-workover operations and shall not be left 
unattended at any time unless the well is shut in and secured;
    (b) The following well-control fluid equipment shall be installed, 
maintained, and utilized:
    (1) A fill-up line above the uppermost BOP,
    (2) A well-control fluid-volume measuring device for determining 
fluid volumes when filling the hole on trips, and
    (3) A recording mud-pit-level indicator to determine mud-pit-volume 
gains and losses. This indicator shall include both a visual and an 
audible warning device.
    (c) When coming out of the hole with drill pipe or a workover 
string, the annulus shall be filled with well-control fluid before the 
change in fluid level decreases the hydrostatic pressure 75 psi or every 
five stands of drill pipe or workover string, whichever gives a lower 
decrease in hydrostatic pressure. The number of stands of drill pipe or 
workover string and drill collars that may be pulled prior to filling 
the hole and the equivalent well-control fluid volume shall be 
calculated and posted near the operator's station. A mechanical, 
volumetric, or electronic device for measuring the amount of well-
control fluid required to fill the hole shall be utilized.



Sec. 250.284  Blowout prevention equipment.

    (a) The BOP system and system components and related well-control 
equipment shall be designed, used, maintained, and tested in a manner 
necessary to assure well control in foreseeable conditions and 
circumstances, including subfreezing conditions. The working pressure of 
the BOP system and system components shall equal or exceed the expected 
surface pressure to which they may be subjected.
    (b) The minimum BOP stack for well-completion operations or for 
well-workover operations with the tree removed shall consist of the 
following:
    (1) Three remote-controlled, hydraulically operated preventers 
including at least one equipped with pipe rams, one with blind rams, and 
one annular type.
    (2) When a tapered string is used, the minimum BOP stack shall 
consist of either of the following:
    (i) An annular preventer, one set of variable bore rams capable of 
sealing around both sizes in the string, and one set of blind rams; or
    (ii) An annular preventer, one set of pipe rams capable of sealing 
around the larger size string, a preventer equipped with blind-shear 
rams, and a crossover sub to the larger size pipe that shall be readily 
available on the rig floor.
    (c) The BOP systems for well-completion operations, or for well-
workover operations with the tree removed, shall be equipped with the 
following:
    (1) An accumulator system that provides sufficient capacity to 
supply 1.5 times the volume necessary to close and hold closed all BOP 
equipment units with a minimum pressure of 200 psi above the precharge 
pressure without assistance from a charging system. After February 14, 
1992, accumulator regulators supplied by rig air which do not have a 
secondary source of pneumatic supply shall be equipped with manual 
overrides or alternately other devices provided to ensure capability of 
hydraulic operations if rig air is lost;

[[Page 382]]

    (2) An automatic backup to the accumulator system supplied by a 
power source independent from the power source to the primary 
accumulator system and possessing sufficient capacity to close all BOP's 
and hold them closed;
    (3) Locking devices for the pipe-ram preventers;
    (4) At least one remote BOP-control station and one BOP-control 
station on the rig floor; and
    (5) A choke line and a kill line each equipped with two full-opening 
valves and a choke manifold. One of the choke-line valves and one of the 
kill-line valves shall be remotely controlled except that a check valve 
may be installed on the kill line in lieu of the remotely-controlled 
valve provided that two readily accessible manual valves are in place, 
and the check valve is placed between the manual valve and the pump.
    (d) The minimum BOP-stack components for well-workover operations 
with the tree in place and performed through the wellhead inside of the 
sulphur line using small diameter jointed pipe (usually \3/4\ inch to 
1\1/4\ inch) as a work string; i.e., small-tubing operations, shall 
consist of the following:
    (1) For air line changes, the well shall be killed prior to 
beginning operations. The procedures for killing the well shall be 
included in the description of well-workover procedures in accordance 
with Sec. 250.282 of this part. Under these circumstances, no BOP 
equipment is required.
    (2) For other work inside of the sulphur line, a tubing stripper or 
annular preventer shall be installed prior to beginning work.
    (e) An essentially full-opening, work-string safety valve shall be 
maintained on the rig floor at all times during well-completion 
operations. A wrench to fit the work-string safety valve shall be 
readily available. Proper connections shall be readily available for 
inserting a safety valve in the work string.



Sec. 250.285  Blowout preventer system testing, records, and drills.

    (a) Prior to conducting high-pressure tests, all BOP systems shall 
be tested to a pressure of 200 to 300 psi.
    (b) Ram-type BOP's and the choke manifold shall be pressure tested 
with water to a rated working pressure or as otherwise approved by the 
District Supervisor. Annular type BOP's shall be pressure tested with 
water to 70 percent of rated working pressure or as otherwise approved 
by the District Supervisor.
    (c) In conjunction with the weekly pressure test of BOP systems 
required in paragraph (d) of this section, the choke manifold valves, 
upper and lower kelly cocks, and drill-string safety valves shall be 
pressure tested to pipe-ram test pressures. Safety valves with proper 
casing connections shall be actuated prior to running casing.
    (d) BOP system shall be pressure tested as follows:
    (1) When installed;
    (2) Before drilling out each string of casing or before continuing 
operations in cases where cement is not drilled out;
    (3) At least once each week, but not exceeding 7 days between 
pressure tests, alternating between control stations. If either control 
system is not functional, further drilling operations shall be suspended 
until that system becomes operable. A period of more than 7 days between 
BOP tests is allowed when there is a stuck drill pipe or there are 
pressure control operations, and remedial efforts are being performed, 
provided that the pressure tests are conducted as soon as possible and 
before normal operations resume. The time, date, and reason for 
postponing pressure testing shall be entered into the driller's report. 
Pressure testing shall be performed at intervals to allow each drilling 
crew to operate the equipment. The weekly pressure test is not required 
for blind and blind-shear rams;
    (4) Blind and blind-shear rams shall be actuated at least once every 
7 days. Closing pressure on the blind and blind-shear rams greater than 
necessary to indicate proper operation of the rams is not required;
    (5) Variable bore-pipe rams shall be pressure tested against all 
sizes of pipe in use, excluding drill collars and bottomhole tools; and
    (6) Following the disconnection or repair of any well-pressure 
containment

[[Page 383]]

seal in the wellhead/BOP stack assembly, the pressure tests may be 
limited to the affected component.
    (e) All personnel engaged in well-completion operations shall 
participate in a weekly BOP drill to familiarize crew members with 
appropriate safety measures.
    (f) The lessee shall record pressure conditions during BOP tests on 
pressure charts, unless otherwise approved by the District Supervisor. 
The test duration for each BOP component tested shall be sufficient to 
demonstrate that the component is effectively holding pressure. The 
charts shall be certified as correct by the operator's representative at 
the facility.
    (g) The time, date, and results of all pressure tests, actuations, 
inspections, and crew drills of the BOP system and system components 
shall be recorded in the operations log. The BOP tests shall be 
documented in accordance with the following:
    (1) The documentation shall indicate the sequential order of BOP and 
auxiliary equipment testing and the pressure and duration of each test. 
As an alternate, the documentation in the operations log may reference a 
BOP test plan that contains the required information and is retained on 
file at the facility.
    (2) The control station used during the test shall be identified in 
the operations log.
    (3) Any problems or irregularities observed during BOP and auxiliary 
equipment testing and any actions taken to remedy such problems or 
irregularities shall be noted in the operations log.
    (4) Documentation required to be entered in the driller's report may 
instead be referenced in the driller's report. All records, including 
pressure charts, driller's report, and referenced documents, pertaining 
to BOP tests, actuations, and inspections shall be available for MMS 
review at the facility for the duration of the drilling activity. 
Following completion of the drilling activity, all drilling records 
shall be retained for a period of 2 years at the facility, at the 
lessee's field office nearest the OCS facility, or at another location 
conveniently available to the District Supervisor.



Sec. 250.286  Tubing and wellhead equipment.

    (a) No tubing string shall be placed into service or continue to be 
used unless such tubing string has the necessary strength and pressure 
integrity and is otherwise suitable for its intended use.
    (b) Wellhead, tree, and related equipment shall be designed, 
installed, tested, used, and maintained so as to achieve and maintain 
pressure control.



Sec. 250.290  Production requirements.

    (a) The lessee shall conduct sulphur production operations in 
compliance with the approved Development and Production Plan 
requirements of Secs. 250.290 through 250.297 of this subpart and 
requirements of this part, as appropriate.
    (b) Production safety equipment shall be designed, installed, used, 
maintained, and tested in a manner to assure the safety of operations 
and protection of the human, marine, and coastal environments.



Sec. 250.291  Design, installation, and operation of production systems.

    (a) General. All production facilities shall be designed, installed, 
and maintained in a manner that provides for efficiency and safety of 
operations and protection of the environment.
    (b) Approval of design and installation features for sulphur 
production facilities. Prior to installation, the lessee shall submit a 
sulphur production system application, in duplicate, to the District 
Supervisor for approval. The application shall include information 
relative to the proposed design and installation features. Information 
concerning approved design and installation features shall be maintained 
by the lessee at the lessee's offshore field office nearest the OCS 
facility or at another location conveniently available to the District 
Supervisor. All approvals are subject to field verification. The 
application shall include the following:
    (1) A schematic flow diagram showing size, capacity, design, working 
pressure of separators, storage tanks, compressor pumps, metering 
devices, and other sulphur-handling vessels;
    (2) A schematic piping diagram showing the size and maximum 
allowable

[[Page 384]]

working pressures as determined in accordance with API RP 14E, 
Recommended Practice for Design and Installation of Offshore Production 
Platform Piping Systems;
    (3) Electrical system information including a plan of each platform 
deck, outlining all hazardous areas classified in accordance with API RP 
500, Recommended Practice for Classification of Locations for Electrical 
Installations at Petroleum Facilities, and outlining areas in which 
potential ignition sources are to be installed;
    (4) Certification that the design for the mechanical and electrical 
systems to be installed were approved by registered professional 
engineers. After these systems are installed, the lessee shall submit a 
statement to the District Supervisor certifying that the new 
installations conform to the approved designs of this subpart.
    (c) Hydrocarbon handling vessels associated with fuel gas system. 
Hydrocarbon handling vessels associated with the fuel gas system shall 
be protected with a basic and ancillary surface safety system designed, 
analyzed, installed, tested, and maintained in operating condition in 
accordance with the provisions of API Recommended Practice for Analysis, 
Design, Installation and Testing of Basic Surface Safety Systems for 
Offshore Production Platforms (API RP 14C). If processing components are 
to be utilized, other than those for which Safety Analysis Checklists 
are included in API RP 14C, the analysis technique and documentation 
specified therein shall be utilized to determine the effects and 
requirements of these components upon the safety system.
    (d) Approval of safety-systems design and installation features for 
fuel gas system. Prior to installation, the lessee shall submit a fuel 
gas safety system application, in duplicate, to the District Supervisor 
for approval. The application shall include information relative to the 
proposed design and installation features. Information concerning 
approved design and installation features shall be maintained by the 
lessee at the lessee's offshore field office nearest the OCS facility or 
at another location conveniently available to the District Supervisor. 
All approvals are subject to field verification. The application shall 
include the following:
    (1) A schematic flow diagram showing size, capacity, design, working 
pressure of separators, storage tanks, compressor pumps, metering 
devices, and other hydrocarbon-handling vessels;
    (2) A schematic flow diagram (API RP 14C, Figure E1) and the related 
Safety Analysis Function Evaluation chart (API RP 14C, subsection 4.3c);
    (3) A schematic piping diagram showing the size and maximum 
allowable working pressures as determined in accordance with API RP 14E, 
Design and lnstallation of Offshore Production Platform Piping Systems;
    (4) Electrical system information including the following:
    (i) A plan of each platform deck, outlining all hazardous areas 
classified in accordance with API RP 500 and outlining areas in which 
potential ignition sources are to be installed;
    (ii) All significant hydrocarbon sources and a description of the 
type of decking, ceiling, walls (e.g., grating or solid), and firewalls; 
and
    (iii) Elementary electrical schematic of any platform safety 
shutdown system with a functional legend.
    (5) Certification that the design for the mechanical and electrical 
systems to be installed was approved by registered professional 
engineers. After these systems are installed, the lessee shall submit a 
statement to the District Supervisor certifying that the new 
installations conform to the approved designs of this subpart; and
    (6) Design and schematics of the installation and maintenance of all 
fire- and gas-detection systems including the following:
    (i) Type, location, and number of detection heads;
    (ii) Type and kind of alarm, including emergency equipment to be 
activated;
    (iii) Method used for detection;
    (iv) Method and frequency of calibration; and
    (v) A functional block diagram of the detection system, including 
the electric power supply.

53 FR 10690, Apr. 1, 1988, as amended at [61 FR 60026, Nov. 26, 1996]

[[Page 385]]



Sec. 250.292  Additional production and fuel gas system requirements.

    (a) General. Lessees shall comply with the following production 
safety system requirements (some of which are in addition to those 
contained in Sec. 250.291 of this part).
    (b) Design, installation, and operation of additional production 
systems, including fuel gas handling safety systems. (1) Pressure and 
fired vessels shall be designed, fabricated, code stamped, and 
maintained in accordance with applicable provisions of section I, IV, 
and VIII of the American Society of Mechanical Engineers (ASME) Boiler 
and Pressure Vessel Code.
    (i) Pressure safety relief valves shall be designed, installed, and 
maintained in accordance with applicable provisions of sections I, IV, 
and VIII of the ANSI/ASME Boiler and Pressure Vessel Code. The safety 
relief valves shall conform to the valve-sizing and pressure-relieving 
requirements specified in these documents; however, the safety relief 
valves shall be set no higher than the maximum-allowable working 
pressure of the vessel. All safety relief valves and vents shall be 
piped in such a way as to prevent fluid from striking personnel or 
ignition sources.
    (ii) The lessee shall use pressure recorders to establish the 
operating pressure ranges of pressure vessels in order to establish the 
pressure-sensor settings. Pressure-recording charts used to determine 
operating pressure ranges shall be maintained by the lessee for a period 
of 2 years at the lessee's field office nearest the OCS facility or at 
another location conveniently available to the District Supervisor. The 
high-pressure sensor shall be set no higher than 15 percent or 5 psi, 
whichever is greater, above the highest operating pressure of the 
vessel. This setting shall also be set sufficiently below (15 percent or 
5 psi, whichever is greater) the safety relief valve's set pressure to 
assure that the high-pressure sensor sounds an alarm before the safety 
relief valve starts relieving. The low-pressure sensor shall sound an 
alarm no lower than 15 percent or 5 psi, whichever is greater, below the 
lowest pressure in the operating range.
    (2) Engine exhaust. Engine exhausts shall be equipped to comply with 
the insulation and personnel protection requirements of API RP 14C, 
section 4.2c(4). Exhaust piping from diesel engines shall be equipped 
with spark arresters.
    (3) Firefighting systems. Firefighting systems shall conform to 
subsection 5.2, Fire Water Systems, of API RP 14G, Recommended Practice 
for Fire Prevention and Control on Open Type Offshore Production 
Platforms, and shall be subject to the approval of the District 
Supervisor. Additional requirements shall apply as follows:
    (i) A firewater system consisting of rigid pipe with firehose 
stations shall be installed. The firewater system shall be installed to 
provide needed protection, especially in areas where fuel handling 
equipment is located.
    (ii) Fuel or power for firewater pump drivers shall be available for 
at least 30 minutes of run time during platform shut-in time. If 
necessary, an alternate fuel or power supply shall be installed to 
provide for this pump-operating time unless an alternate firefighting 
system has been approved by the District Supervisor;
    (iii) A firefighting system using chemicals may be used in lieu of a 
water system if the District Supervisor determines that the use of a 
chemical system provides equivalent fire-protection control; and
    (iv) A diagram of the firefighting system showing the location of 
all firefighting equipment shall be posted in a prominent place on the 
facility or structure.
    (4) Fire- and gas-detection system. (i) Fire (flame, heat, or smoke) 
sensors shall be installed in all enclosed classified areas. Gas sensors 
shall be installed in all inadequately ventilated, enclosed classified 
areas. Adequate ventilation is defined as ventilation that is sufficient 
to prevent accumulation of significant quantities of vapor-air mixture 
in concentrations over 25 percent of the lower explosive limit. One 
approved method of providing adequate ventilation is a change of air 
volume each 5 minutes or 1 cubic foot of air-volume flow per minute per 
square foot of solid floor area, whichever is greater. Enclosed areas 
(e.g., buildings, living quarters, or doghouses) are defined as those 
areas confined on more

[[Page 386]]

than four of their six possible sides by walls, floors, or ceilings more 
restrictive to air flow than grating or fixed open louvers and of 
sufficient size to allow entry of personnel. A classified area is any 
area classified Class I, Group D, Division 1 or 2, following the 
guidelines of API RP 500.
    (ii) All detection systems shall be capable of continuous 
monitoring. Fire-detection systems and portions of combustible gas-
detection systems related to the higher gas concentration levels shall 
be of the manual-reset type. Combustible gas-detection systems related 
to the lower gas-concentration level may be of the automatic-reset type.
    (iii) A fuel-gas odorant or an automatic gas-detection and alarm 
system is required in enclosed, continuously manned areas of the 
facility that are provided with fuel gas. Living quarters and doghouses 
not containing a gas source and not located in a classified area do not 
require a gas detection system.
    (iv) The District Supervisor may require the installation and 
maintenance of a gas detector or alarm in any potentially hazardous 
area.
    (v) Fire- and gas-detection systems shall be an approved type, 
designed and installed in accordance with API RP 14C, API RP 14G, and 
API RP 14F, Recommended Practice for Design and Installation of 
Electrical Systems for Offshore Production Platforms.
    (c) General platform operations. Safety devices shall not be 
bypassed or blocked out of service unless they are temporarily out of 
service for startup, maintenance, or testing procedures. Only the 
minimum number of safety devices shall be taken out of service. 
Personnel shall monitor the bypassed or blocked out functions until the 
safety devices are placed back in service. Any safety device that is 
temporarily out of service shall be flagged by the person taking such 
device out of service.

[53 FR 10690, Apr. 1, 1988, as amended at 61 FR 60026, Nov. 26, 1996]



Sec. 250.293  Safety-system testing and records.

    (a) Inspection and testing. Safety-system devices shall be 
successfully inspected and tested by the lessee at the interval 
specified below or more frequently if operating conditions warrant. 
Testing shall be in accordance with API RP 14C, appendix D or for 
safety-system devices other than those listed in API RP 14C, Appendix D 
the analysis technique and documentation specified therein shall be 
utilized for inspection and testing of these components, and the 
following:
    (1) Safety relief valves on the natural gas feed system for power 
plant operations such as pressure safety valves shall be inspected and 
tested for operation at least once every 12 months. These valves shall 
be either bench tested or equipped to permit testing with an external 
pressure source.
    (2) The following safety devices shall be inspected and tested at 
least once each calendar month, but at no time shall more than 6 weeks 
elapse between tests:
    (i) All pressure safety high or pressure safety low, and
    (ii) All level safety high and level safety low controls.
    (3) All pumps for firewater systems shall be inspected and operated 
weekly.
    (4) All fire- (flame, heat, or smoke) and gas-detection systems 
shall be inspected and tested for operation and recalibrated every 3 
months provided that testing can be performed in a nondestructive 
manner.
    (5) Prior to the commencement of production, the lessee shall notify 
the District Supervisor when the lessee is ready to conduct a 
preproduction test and inspection of the safety system. The lessee shall 
also notify the District Supervisor upon commencement of production in 
order that a complete inspection may be conducted.
    (b) Records. The lessee shall maintain records for a period of 2 
years for each safety device installed. These records shall be 
maintained by the lessee at the lessee's field office nearest the OCS 
facility or another location conveniently available to the District 
Supervisor. These records shall be available for MMS review. The records 
shall show the present status and history of each safety device, 
including dates and details of installation, removal, inspection, 
testing, repairing, adjustments, and reinstallation.

[[Page 387]]



Sec. 250.294  Safety device training.

    Prior to engaging in production operations on a lease and 
periodically thereafter, personnel installing, inspecting, testing, and 
maintaining safety devices shall be instructed in the safety 
requirements of the operations to be performed; possible hazards to be 
encountered; and general safety considerations to be taken to protect 
personnel, equipment, and the environment. Date and time of safety 
meetings shall be recorded and available for MMS review.



Sec. 250.295  Production rates.

    Each sulphur deposit shall be produced at rates that will provide 
economic development and depletion of the deposit in a manner that would 
maximize the ultimate recovery of sulphur without resulting in waste 
(e.g., an undue reduction in the recovery of oil and gas from an 
associated hydrocarbon accumulation).



Sec. 250.296  Production measurement.

    (a) General. Measurement equipment and security procedures shall be 
designed, installed, used, maintained, and tested so as to accurately 
and completely measure the sulphur produced on a lease for purposes of 
royalty determination.
    (b) Application and approval. The lessee shall not commence 
production of sulphur until the Regional Supervisor has approved the 
method of measurement. The request for approval of the method of 
measurement shall contain sufficient information to demonstrate to the 
satisfaction of the Regional Supervisor that the method of measurement 
meets the requirements of paragraph (a) of this section.



Sec. 250.297  Site security.

    (a) All locations where sulphur is produced, measured, or stored 
shall be operated and maintained to ensure against the loss or theft of 
produced sulphur and to assure accurate and complete measurement of 
produced sulphur for royalty purposes.
    (b) Evidence of mishandling of produced sulphur from an offshore 
lease, or tampering or falsifying any measurement of production for an 
offshore lease, shall be reported to the Regional Supervisor as soon as 
possible but no later than the next business day after discovery of the 
evidence of mishandling.



PART 251--GEOLOGICAL AND GEOPHYSICAL (G & G) EXPLORATIONS OF THE OUTER CONTINENTAL SHELF--Table of Contents




Sec.
251.0  Authority for information collection.
251.1  Purpose.
251.2  Definitions.
251.3  Administrative authority and applicability.
251.3-1  Administrative authority.
251.3-2  Functions of Director.
251.3-3  Geological and geophysical activities under a lease.
251.3-4  Geological and geophysical activities not under a lease.
251.3-5  General requirements of notices and permits.
251.4  Geological and geophysical activities requiring notices or 
          permits.
251.4-1  Geological and geophysical exploration for mineral resources.
251.4-2  Geological or geophysical scientific research.
251.5  Applying for notices or permits.
251.5-1  Permit forms.
251.5-2  Notices.
251.5-3  Filing locations for permits to conduct exploration for mineral 
          resources.
251.5-4  Filing locations for notices or permits to conduct scientific 
          research.
251.6  Test drilling activities.
251.6-1  Permit or notice requirements for shallow test drilling.
251.6-2  Permit requirements for a deep stratigraphic test.
251.6-3  Group participation in test drilling activities.
251.6-4  Bonds.
251.6-5  Duration of exploration activities.
251.7  Inspection and reporting of progress and results of activities 
          conducted under permits.
251.7-1  Inspection and observation of exploration activities.
251.7-2  Progress report on activities conducted under a permit.
251.7-3  Final report on activities conducted under a permit.
251.8  Suspension and cancellation of authority to conduct activities 
          under permit.
251.9  Penalties.
251.10  Appeals.
251.11  Inspection, selection, and submission of geological information 
          and data.
251.12  Inspection, selection, and submission of geophysical information 
          and data.
251.13  Reimbursement to permittees.

[[Page 388]]

251.14  Disclosure of information and data submitted under permits.
251.14-1  Disclosure of information and data to the public.
251.14-2  Disclosure to independent contractors.
251.14-3  Sharing of information with affected States.
251.14-4  Disclosure of information and data relating to specific 
          contractual commitments.

    Authority: 43 U.S.C. 1331 et seq.

    Source: 45 FR 6344, Jan. 25, 1980, unless otherwise noted.



Sec. 251.0  Authority for information collection.

    (a) The information collection requirement contained in 30 CFR 
251.13 has been approved by the Office of Management and Budget under 44 
U.S.C. 3507 and assigned clearance number 1028-0039. The information is 
being collected and will be used to determine eligibility for 
reimbursement from the Government for certain costs. The obligation to 
respond is required to obtain a benefit.
    (b) The information collection requirement contained in Sec. 251.7-2 
has been approved by the Office of Management and Budget under 44 U.S.C. 
3504(h) and assigned clearance number 1010-0036. The information is 
being collected and will be used to monitor the progress of activities 
carried out under an offshore permit. The obligation to respond is 
mandatory.
    (c) The information collection requirements contained in Sec. 251.6 
of this part do not require approval by the Office of Management and 
Budget under 44 U.S.C. 3504(h) because there are fewer than 10 
respondents annually.
    (d) The information collection requirements contained in 30 CFR 
251.11 and 251.12 have been approved by the Office of Management and 
Budget under 44 U.S.C. 3504(h) and assigned clearance number 1010-0034. 
The information is being collected for regulatory compliance. This 
information will be used to inspect and select geological and 
geophysical data and information collected under a Federal permit 
offshore. The obligation to respond is mandatory under section 26 of the 
Outer Continental Shelf Lands Act (43 U.S.C. 1352).
    (e) The information collection requirements contained in 30 CFR 
251.6-2 have been approved by the Office of Management and Budget under 
44 U.S.C. 3507 and assigned clearance number 1010-0049. The information 
is being collected for regulation compliance. This information will be 
used to analyze and evaluate planned drilling activities of permittees 
on the Federal OCS. The obligation to respond is mandatory.
    (f) The information collection requirements contained in 30 CFR 
251.5 have been approved by the Office of Management and Budget under 44 
U.S.C. 3501 et seq and assigned clearance number 1010-0048. The 
information is being collected to evaluate permit applications to 
conduct prelease exploration offshore and to moonitor activities of 
scientific exploration conducted under notices to ensure there is no 
environmental degradation, personal harm, damage to historical or 
cultural sites, or interference with other uses. The response is 
required to obtain a benefit.

[47 FR 25331, June 11, 1982, as amended at 48 FR 37968, Aug. 22, 1983; 
48 FR 43324, Sept. 23, 1983; 48 FR 46026, Oct. 11, 1983; 48 FR 55457, 
Dec. 13, 1983; 53 FR 24688, June 30, 1988]



Sec. 251.1  Purpose.

    (a) The Act authorizes the Secretary to prescribe rules and 
regulations necessary to carry out the provisions of the Act. The 
primary purpose of the regulations in this part is to prescribe 
policies, procedures, and requirements for conducting geological and 
geophysical activities associated with exploration for oil, gas, or 
sulphur not authorized under a lease in the Outer Continental Shelf 
(OCS). These activities may take place on unleased lands or on lands 
under lease to a third party. These activities are limited to geological 
and geophysical exploration for oil, gas, and sulphur and geological and 
geophysical research related to oil, gas, or sulphur, which involves the 
use of solid or liquid explosives or drilling activities. The 
requirements of the regulations in this part implement the provisions of 
sections 5, 8(g), 11 (a) and (g), 19, 24, and 26 of the Act. Federal 
Agencies are exempt from the regulations in this part.

[[Page 389]]

    (b) Notwithstanding any other provisions of the regulations in this 
part, geological and geophysical exploration for OCS minerals other than 
oil, gas, and sulphur and geological and geophysical research associated 
with OCS minerals other than oil, gas, and sulphur are governed by the 
provisions of part 280 of this title.

[53 FR 25256, July 5, 1988]



Sec. 251.2  Definitions.

    When used in this part, the following terms shall have the meaning 
given below:
    (a) Act means the Outer Continental Shelf Lands Act, as amended (43 
U.S.C. 1331 et seq.).
    (b) Affected local government means the principal governing body of 
a locality which is in an affected State and is identified by the 
Governor of that State as a locality which will be significantly 
affected by oil and gas activities on the OCS.
    (c) Affected State means, with respect to any program, plan, lease 
sale, or other activity proposed, conducted, or approved pursuant to the 
provisions of the Act, any State:
    (1) The laws of which are declared, pursuant to section 4(a)(2)(A) 
of the Act, to be the law of the United States for the portion of the 
OCS on which such activity is, or is proposed to be, conducted;
    (2) Which is, or is proposed to be, directly connected by 
transportation facilities to any artificial island or installation or 
other device permanently or temporarily attached to the seabed;
    (3) Which is receiving, or in accordance with the proposed activity, 
will receive oil for processing, refining, or transshipment which was 
extracted from the OCS and transported directly to the State by means of 
vessels or by a combination of means including vessels;
    (4) Which is designated by the Secretary as a State in which there 
is a substantial probability of significant impact on or damage to the 
coastal, marine, or human environment or a State in which there will be 
significant changes in the social, governmental, or economic 
infrastructure resulting from the exploration, development, and 
production of oil and gas anywhere in the OCS; or
    (5) In which the Secretary finds that because of such activity there 
is, or will be, a significant risk of serious damage, due to factors 
such as prevailing winds and currents, to the marine or coastal 
environment in the event of any oil spill, blowout, or release of oil or 
gas from vessels, pipelines, or other transshipment facilities.
    (d) Analyzed geological information means data collected under a 
permit or a lease which have been analyzed. Analysis may include, but is 
not limited to, identification of lithologic and fossil content, core 
analyses, laboratory analyses of physical and chemical properties, well 
logs or charts, results and data obtained from formation fluid tests, 
and descriptions of hydrocarbon occurrences or hazardous conditions.
    (e) Coastal environment means the physical, atmospheric, and 
biological components, conditions, and factors which interactively 
determine the productivity, state, condition, and quality of the 
terrestrial ecosystem from the shoreline inward to the boundaries of the 
coastal zone.
    (f) Coastal zone means the coastal waters (including the lands 
therein and thereunder) and the adjacent shorelands (including the 
waters therein and thereunder), strongly influenced by each other and in 
proximity to the shorelines of the several coastal States. The coastal 
zone includes islands, transition and intertidal areas, salt marshes, 
wetlands, and beaches. The coastal zone extends seaward to the outer 
limit of the United States territorial sea and extends inland from the 
shoreline to the extent necessary to control shorelands, the uses of 
which have a direct and significant impact on the coastal waters, and 
the inward boundaries of which may be identified by the several coastal 
States, pursuant to the authority of section 305(b)(1) of the Coastal 
Zone Management Act.
    (g) Coastal Zone Management Act means the Coastal Zone Management 
Act of 1972, as amended (16 U.S.C. 1451 et seq.).
    (h) Cultural resource means a site, structure, or object of 
historical or archeological significance.

[[Page 390]]

    (i) Data means facts and statistics or samples which have not been 
analyzed or processed.
    (j) Deep stratigraphic test means drilling which involves the 
penetration into the sea bottom of more than 50 feet (15.2 meters) of 
consolidated rock or a total of more than 300 feet (91.4 meters).
    (k) Director means the Director of the Minerals Management Service, 
U.S. Department of the Interior or a subordinate authorized to act on 
the Director's behalf.
    (l) Exploration means the process of searching for minerals. 
Exploration activities include but are not limited to: (1) Geophysical 
surveys where magnetic, gravity, seismic, or other systems are used to 
detect or imply the presence of minerals, and (2) any drilling, whether 
on or off a geological structure.
    (m) Gas means any fluid, either combustible or noncombustible, which 
is extracted from a reservoir and which has neither independent shape 
nor volume, but tends to expand indefinitely; a substance that exists in 
a gaseous or rarefied state under standard temperature and pressure 
conditions.
    (n) Geological exploration for mineral resources means any operation 
conducted on the OCS which utilizes geological and geochemical 
techniques, including, but not limited to, core and test drilling, well 
logging techniques, and various bottom sampling methods to produce 
information and data on mineral resources, including information and 
data in support of possible exploration and development activity. The 
term does not include scientific research.
    (o) Geophysical exploration for mineral resources means any 
operation conducted on the OCS which utilizes geophysical techniques, 
including, but not limited to gravity, magnetic, and various seismic 
methods, to produce information and data in support of possible 
exploration and development activity. The term does not include 
scientific research.
    (p) Geological or geophysical scientific research means any 
investigation conducted on the OCS using solid or liquid explosives, or 
drilling activities for scientific research purposes involving the 
gathering and analysis of geological or geophysical information and data 
which are made available to the public for inspection and reproduction 
at the earliest practicable time.
    (q) Governor means the Governor of a State, or the person or entity 
designated by, or pusuant to, State law to exercise the powers granted 
to a Governor pursuant to the Act.
    (r) Human environment means the physical, social, and economic 
components, conditions, and factors which interactively determine the 
state, condition, and quality of living conditions, employment, and 
health of those affected, directly or indirectly, by activities 
occurring on the OCS.
    (s) Hydrocarbon occurrences means the direct or indirect detection 
during drilling operations of any liquid or gaseous hydrocarbons by 
examination of well cuttings, cores, gas detector readings, formation 
fluid tests, wireline logs, or by any other means. The term does not 
include background gas, minor accumulations of gas, or heavy oil 
residues on cuttings and cores.
    (t) Information, when used without a qualifying adjective, includes 
analyzed geological information, processed geophysical information, 
interpreted geological information, and interpreted geophysical 
information.
    (u) Interpreted geological information means knowledge, often in the 
form of schematic cross sections and maps, developed by determining the 
geological significance of data and analyzed geological information.
    (v) Interpreted geophysical information means knowledge, often in 
the form of seismic cross sections and maps, developed by determining 
the geological significance of geophysical data and processed 
geophysical information.
    (w) Lease means (1) any form of authorization which is issued under 
section 8 or maintained under section 6 of the Act and which authorizes 
exploration for, and development and production of, minerals, or (2) the 
area covered by such authorization, whichever is required by the 
context.
    (x) Lessee means the party authorized by a lease, or an approved 
assignment thereof, to explore for, develop, and produce the leased 
deposits in accordance with the regulations in part 250 of

[[Page 391]]

this chapter. The term includes all parties holding such authority by or 
through the lessee.
    (y) Marine environment means the physical, atmospheric, and 
biological components, conditions, and factors which interactively 
determine the productivity, state, condition, and quality of the marine 
ecosystem, including the waters of the high seas, the contiguous zone, 
transitional and intertidal areas, salt marshes, and wetlands within the 
coastal zone and on the OCS.
    (z) Minerals includes oil, gas, sulphur, geopressured-geothermal and 
associated resources, and all other minerals which are authorized by an 
Act of Congress to be produced from ``public lands'' as defined in 
section 103 of the Federal Land Policy and Management Act of 1976 (43 
U.S.C. 1702).
    (aa) National Environmental Policy Act means the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).
    (bb) Notice means the statement of intent to conduct geological 
scientific research which involves shallow test drilling activities.
    (cc) OCS Order means a formal numbered Order, issued by the 
Director, that implements the regulations contained in this part and 
specifically applies to operations in an area in the Order.
    (dd) Oil means any fluid hydrocarbon substance other than gas which 
is extracted in a fluid state from a reservoir and which exists in a 
fluid state under the existing temperature and pressure conditions of 
the reservoir. Oil includes liquefiable hydrocarbon substances such as 
drip gasoline or other natural condensates recovered or recoverable in a 
liquid state from produced gas.
    (ee) Operator means the individual, partnership, firm, or 
corporation having control or management of operations on the leased 
area or a portion thereof. The operator may be a lessee, designated 
agent of the lessee, or holder of rights under an approved operating 
agreement.
    (ff) Outer Continental Shelf means all submerged lands which lie 
seaward and outside the area of lands beneath navigable waters as 
defined in section 2 of the Submerged Lands Act (43 U.S.C. 1301), and of 
which the subsoil and seabed appertain to the United States and are 
subject to its jurisdiction and control.
    (gg) Permit means the contract or agreement, other than a lease, 
approved for a specified period of not more than 1 year under which a 
person acquires the right to conduct: (1) Geological exploration for 
mineral resources, (2) geophysical exploration for mineral resources, 
(3) geological scientific research, or (4) geophysical scientific 
research.
    (hh) Permittee means the person authorized by a permit issued 
pursuant to this part to conduct activities on the OCS.
    (ii) Person means a citizen or national of the United States, an 
alien lawfully admitted for permanent residence in the United States as 
defined in 8 U.S.C. 1101(a)(20), a private, public, or municipal 
corporation organized under the laws of the United States or of any 
State or territory thereof, and associations of such citizens, 
nationals, resident aliens, or private, public, or municipal 
corporations, States, or political subdivisions of States. The term does 
not include Federal agencies.
    (jj) Pollution contingency plan means the National Multi-Agency Oil 
and Hazardous Materials Pollution Contingency Plan or any successor plan 
thereto.
    (kk) Processed geophysical information means data collected under a 
permit or a lease which have been processed. Processing involves 
changing the form of data so as to facilitate interpretation. Processing 
operations may include, but are not limited to, applying corrections for 
known perturbing causes, rearranging or filtering data, and combining or 
transforming data elements.
    (ll) Secretary means the Secretary of the Interior or a subordinate 
authorized to act on the Secretary's behalf.
    (mm) Shallow test drilling means drilling into the sea bottom to 
depths less than those specified in the definition of a deep 
stratigraphic test.
    (nn) Third party means any person other than a representative of the 
United States or the permittee.
    (oo) Violation means a failure to comply with any provision of the 
Act, or a

[[Page 392]]

provision of a regulation or order issued under the Act, or any 
provision of a lease, license, or permit issued pursuant to the Act.
Sec. 251.3  Administrative authority and applicability.



Sec. 251.3-1  Administrative authority.

    Exploration or scientific research activities authorized or 
conducted under this part shall be performed in accordance with the Act, 
the regulations in this part, OCS Orders, other orders of the Director, 
and other applicable statutes and regulations, and amendments thereto.



Sec. 251.3-2  Functions of Director.

    The Director shall regulate all operations and other activities 
under this part and perform all duties prescribed by this part. The 
Director is authorized to issue OCS Orders and other written and oral 
orders and to take all other actions necessary to carry out the 
provisions of this part and to prevent harm or damage to, or waste of, 
any natural resource (including any mineral deposit in areas leased or 
not leased), any life (including fish and other aquatic life), property, 
or the marine, coastal, or human environment. The Director shall confirm 
oral orders in writing as soon as possible.



Sec. 251.3-3  Geological and geophysical activities under a lease.

    The regulations in this part shall not apply to geological and 
geophysical exploration conducted by or on behalf of the lessee on a 
lease on the OCS. Those exploration activities shall be governed by the 
regulations in part 250 of this title.



Sec. 251.3-4  Geological and geophysical activities not under a lease.

    The regulations in this part are applicable to permits for 
geological and geophysical activities issued after or unexpired as of 
the effective date of this final rule. Notices filed after the effective 
date of this final rule shall also be subject to the regulations in this 
part. If the regulations in this part conflict with the provisions of a 
permit which was issued under regulations published in the Federal 
Register on June 23, 1976 (41 FR 25893), the requirements of the permit 
shall govern, except for any requirements limiting the Director's 
authority to inspect and require the submission of interpretations 
derived from information and data acquired under those permits issued 
after January 27, 1978, as established by part 252 of this title.



Sec. 251.3-5  General requirements of notices and permits.

    (a) Geological or geophysical activities for mineral exploration or 
scientific research activities authorized under this part shall be 
conducted so that those activities do not:
    (1) Interfere with or endanger operations under any lease issued or 
maintained pursuant to the Act;
    (2) Cause harm or damage to aquatic life;
    (3) Cause pollution;
    (4) Create hazardous or unsafe conditions;
    (5) Unreasonably interfere with or harm other uses of the area; or
    (6) Disturb cultural resources.
    (b) Any person conducting geological or geophysical activities for 
mineral exploration or scientific research under this part shall 
immediately report to the Director when these activities:
    (1) Detect hydrocarbon occurrences;
    (2) Encounter evironmental hazards which constitute an imminent 
threat to human activity; or
    (3) Adversely affect the environment, aquatic life, cultural 
resources, or other uses of the area in which the exploration activity 
is conducted.
    (c) Any person conducting shallow test drilling or deep 
stratigraphic test drilling geological activities under a permit for 
mineral exploration or scientific research under this part shall utilize 
the best available and safest technologies which the Director determines 
to be economically feasible.
    (d) Authorization granted under this part to conduct geological and 
geophysical exploration for minerals or for scientific research shall 
not confer a right to any discovered oil, gas, or other minerals, or to 
a lease under the Act.

[[Page 393]]

Sec. 251.4  Geological and geophysical activities requiring notices or 
permits.



Sec. 251.4-1  Geological and geophysical exploration for mineral resources.

    Geological or geophysical exploration for mineral resources may not 
be conducted on the OCS without an approved permit unless such 
activities are being conducted pursuant to a lease issued or maintained 
under the Act. Separate permits must be obtained for geological 
exploration for mineral resources and for geophysical exploration for 
mineral resources. If the Director disapproves an application, the 
statement of rejection shall state the reasons for the denial, and shall 
advise the applicant of those changes needed to obtain approval.



Sec. 251.4-2  Geological or geophysical scientific research.

    Geological or geophysical scientific research may not be conducted 
by any person on the OCS without an approved permit or filing of a 
notice unless such activities are being conducted pursuant to a lease 
issued or maintained under the Act.
    (a) Separate permits must be obtained for geological scientific 
research and for geophysical scientific research which involves the use 
of solid or liquid explosives or the drilling of a deep stratigraphic 
test. If the Director disapproves an application, the statement of 
rejection shall state the reasons for the denial, and shall advise the 
applicant of the changes needed to obtain approval.
    (b) A notice must be filed with the Director at least 30 days prior 
to the commencement of scientific research activities which involve 
shallow test drilling. Within 21 days of the filing of the notice, the 
Director may disapprove the notice by sending a statement of disapproval 
by certified mail to the person who filed the notice. If the Director 
disapproves the notice, the statement shall state the reasons for 
disapproval and shall advise the applicant of recommended changes.
Sec. 251.5  Applying for notices or permits.



Sec. 251.5-1  Permit forms.

    (a) An application for a permit shall be submitted in a form and 
manner prescribed and approved by the Director. Each application for a 
permit shall include:
    (1) The name of any person who will conduct the proposed exploration 
or research activity;
    (2) The name of any person who will participate in the proposed 
exploration or research activity;
    (3) The type of exploration or research activity and the manner in 
which the activity will be conducted;
    (4) The location on the OCS where the exploration or research 
activity will be conducted;
    (5) The purpose for conducting the exploration or research activity;
    (6) The dates on which the exploration or research activity is 
proposed to be commenced and completed; and,
    (7) Such other relevant information and data as the Director may 
require.

[45 FR 6344, Jan. 25, 1980, as amended at 53 FR 24688, June 30, 1988]



Sec. 251.5-2  Notices.

    A notice shall not be on a standardized form, but shall be signed 
and shall state:
    (a) The name of the person conducting or participating in the 
proposed research;
    (b) The type of research and manner in which it will be conducted;
    (c) The location, designated on a map, plat, or chart, where the 
research will be conducted;
    (d) The dates, which shall designate a period of not more than 1 
year, on which the research activity is proposed to be commenced and 
completed;
    (e) The proposed time and manner in which the information and data 
resulting from the research will be made available to the public for 
inspection and reproduction, such time being the earliest practicable 
time;
    (f) An agreement that the information and data resulting from the 
research will not be sold or withheld for exclusive use; and

[[Page 394]]

    (g) The name, registry number, registered owner, and port of 
registry of vessels used in the operation.



Sec. 251.5-3  Filing locations for permits to conduct exploration for mineral resources.

    Each application for a permit to conduct geological or geophysical 
exploration for mineral resources in the OCS shall be filed, in 
duplicate, at the following locations:
    (a) For the OCS off the Atlantic Coast--the Regional Supervisor for 
Resource Evaluation, Atlantic OCS Region, Minerals Management Service, 
381 Elden Street, Herndon, Virginia 22070--4817.
    (b) For the OCS in the Gulf of Mexico--the Regional Supervisor for 
Resource Evaluation, Minerals Management Service, Gulf of Mexico OCS 
Region, 1201 Elmwood Park Blvd., New Orleans, Louisiana 70123.
    (c) For the OCS off the coast of the States of California, Oregon, 
or Washington--the Regional Supervisor for Resource Evaluation, Minerals 
Management Service, Pacific OCS Region, 1340 West Sixth Street, Los 
Angeles, California 90017.
    (d) For the OCS off the State of Alaska--the Regional Supervisor for 
Resource Evaluation, Minerals Management Service, Alaska OCS Region, 949 
East 36th Avenue, Anchorage, Alaska 99508.

[53 FR 4392, Feb. 16, 1988, as amended at 54 FR 50617, Dec. 8, 1989]



Sec. 251.5-4  Filing locations for notices or permits to conduct scientific research.

    Each notice or application for a permit to conduct geological or 
geophysical scientific research on the OCS shall be filed, in duplicate, 
at the locations indicated in Sec. 251.5-3 of this part.
Sec. 251.6  Test drilling activities.



Sec. 251.6-1  Permit or notice requirements for shallow test drilling.

    The Director, prior to the commencement of shallow test drilling for 
exploration for mineral resources or for scientific research, may 
require for permits or recommend for notices the gathering and 
submission of geophysical information and data sufficient to determine 
shallow structural detail across and in the vicinity of the proposed 
test. Other information and data may include, but is not limited to, 
seismic, bathymetric, side-scan sonar, and magnetometer systems, across 
and in the vicinity of the proposed test. When required, Secs. 251.6-2 
(c)(1) and (e) and 251.6-3 will apply to permits issued and notices 
filed for shallow test drilling.



Sec. 251.6-2  Permit requirements for a deep stratigraphic test.

    (a) No deep stratigraphic test drilling activities shall be 
initiated or conducted until a Drilling Plan has been submitted by the 
applicant and approved by the Director. The Drilling Plan shall include:
    (1) The proposed type and sequence of drilling activities to be 
undertaken together with a timetable for their performance from 
commencement to completion;
    (2) A description of the drilling rig proposed for use, unless a 
description has been previously submitted to the Director, indicating 
the important features thereof, with special attention to safety 
features and pollution prevention and control features, including oil 
spill containment and cleanup plans and onshore disposal procedures;
    (3) The location of each deep stratigraphic test to be conducted, 
including the surface and projected bottomhole location of the borehole;
    (4) The types of geophysical instrumentation to be used;
    (5) Geophysical information and data sufficient to evaluate seafloor 
characteristics, shallow geologic hazards, and structural detail across 
and in the vicinity of the proposed test to the total depth of the 
proposed test well. Data and information from side-scan sonar and 
magnetometer surveys shall be submitted as required, at the option of 
the Director; and
    (6) Such other relevant information and data as the Director may 
require.
    (b) At the same time the applicant submits a Drilling Plan to the 
Director, an Environmental Report shall be submitted. The report shall 
be in summary form and should include information available at the time 
the related

[[Page 395]]

Drilling Plan is submitted. Information and data which are site-specific 
or which are developed subsequent to the most recent environmental 
impact statement or other environmental impact statements and analyses 
in the immediate area, shall be specifically considered. In order to 
eliminate the repetition of information and data discussed in the 
related plan, a broader presale environmental impact statement, other 
Environmental Reports, environmental analyses, or impact statements 
prepared for the geographic area, the applicant shall summarize the 
information, data, and issues in such other documents and concentrate on 
the issues specific to the site(s) of drilling activity. Discussions 
contained in the other documents shall be referenced when incorporation 
will cause a decrease in bulk without impeding review of the issues. The 
material referred to shall be cited and described briefly in the 
Environmental Report and include a statement of where the material is 
reasonably available for inspection. Any material based on proprietary 
data which is not itself available for inspection shall not be 
referenced. The Environmental Report shall include the following:
    (1)(i) A list and description of new or unusual technologies that 
are to be used; (ii) the location of travel routes for supplies and 
personnel; (iii) the kinds and approximate quantities of energy to be 
used; (iv) the environmental monitoring systems that are to be used; and 
(v) suitable maps and diagrams showing details of the proposed project 
layout.
    (2) A narrative description of the existing environment. This 
section shall include the following information on the area: (i) 
Geology; (ii) physical oceanography; (iii) other uses of the area; (iv) 
flora and fauna; (v) existing environmental monitoring systems; and (vi) 
other unusual or unique characteristics which may affect or be affected 
by the drilling activities.
    (3) A narrative description of the probable impacts of the proposed 
action on the environment and the measures proposed for mitigating these 
impacts.
    (4) A narrative description of any unavoidable or irreversible 
adverse effects on the environment that could be expected to occur as a 
result of the proposed action.
    (5) Such other relevant information and data as the Director may 
require.
    (c)(1) When required under a coastal zone management program 
approved under the Coastal Zone Management Act, the activities proposed 
by an applicant for a permit to conduct geological or geophysical 
exploration for minerals or for geological or geophysical scientific 
research must receive State concurrence in its coastal zone consistency 
certification prior to the Director's approval of any of the activities 
covered under the permit.
    (2) The applicant shall submit a sufficient number of copies of the 
Drilling Plan and Environmental Report to permit the Director to 
transmit copies of each to the Governor of each affected State and the 
coastal zone management agency of each affected State that has a coastal 
zone management program approved under the Coastal Zone Management Act. 
The Director shall also make the Drilling Plan and accompanying 
Environmental Report available to appropriate Federal agencies and the 
public, in accordance with established Departmental practices and 
procedures.
    (d) Any revisions to an approved Drilling Plan must be approved by 
the Director.
    (e) A permittee authorized to drill a deep stratigraphic test shall, 
if requested by the Director, conduct studies to determine whether any 
cultural resources exist in the area that may be affected by such 
drilling, and shall report the findings of those studies to the 
Director. A permittee authorized to perform shallow test drilling may be 
required to conduct similar studies if required by the Director. The 
study shall include a full description of any cultural resources 
detected. The permittee shall take no action that will result in the 
disturbance of cultural resources without the prior approval of the 
Director and, if any cultural resource is discovered after submission of 
the study (i.e., during site preparation or drilling), the permittee 
shall immediately report the discovery to the Director and make every 
reasonable effort to protect the cultural resource

[[Page 396]]

from damage until the Director has given directions as to its 
preservation.
    (f) All OCS regulations relating to drilling operations in part 250 
of this title and all OCS Orders relating to the drilling of wells 
apply, as appropriate, to drilling activities authorized under this 
part.
    (g) At the completion of the test activities, the borehole of all 
deep stratigraphic tests shall be permanently plugged and abandoned by 
the permittee prior to moving the rig off location in accordance with 
the requirements of the regulations in part 250 of this chapter and 
applicable orders. If the tract on which deep stratigraphic test 
drilling has been conducted is later leased for exploration and 
development, the lessee will not be held responsible for the test hole, 
provided the lessee has not reentered or otherwise disturbed the 
borehole.

[45 FR 6344, Jan. 25, 1980, as amended at 48 FR 54008, Nov. 30, 1983; 48 
FR 55457, Dec. 13, 1983]



Sec. 251.6-3  Group participation in test drilling activities.

    (a) In order to minimize duplicative geological exploration 
activities involving the penetration of the seabed of the OCS, a person 
proposing to drill a deep stratigraphic test shall afford all interested 
persons, through a signed agreement, an opportunity to participate in 
the drilling on a cost-sharing basis. The provisions of the agreement 
for sharing the cost of a deep stratigraphic test may include a penalty 
for late participants of not more than 100 percent of the cost to each 
original participant in addition to the original share cost. The 
participants shall assess and distribute penalties in accordance with 
the terms of the agreement. If the Director releases a public notice 
announcing a significant hydrocarbon occurrence, the penalty for 
subsequent late participants may be raised to not more than 300 percent 
of the cost of each original participant in addition to the original 
share cost.
    (b) An applicant proposing to conduct shallow test drilling 
activities shall, when ordered by the Director or when provided in the 
permit, afford all interested persons an opportunity to participate in 
the test activity on a cost-sharing basis with a penalty for late 
participation of not more than 50 percent of the cost to each original 
participant.
    (c) To allow for group participation in shallow or deep test 
drilling activities, the applicant shall:
    (1) Publish a summary statement describing the proposed activity in 
a manner approved or prescribed by the Director;
    (2) Forward a copy of the published statement to the Director;
    (3) Allow at least 30 days from the date of publishing the summary 
statement for other persons to join as original participants;
    (4) Compute the estimated cost to an original participant by 
dividing the estimated total cost of the program by the number of 
original participants; and
    (5) Furnish the Director with a complete list of all participants 
under the permit prior to commencing operations, or at the end of the 
advertising period if operations begin prior to its close. Also, the 
names of all late participants shall be forwarded to the Director.
    (d) If the applicant proposes changes to the original application 
and the Director determines that such changes are significant, the 
Director shall require a republication of the changes and an additional 
30 days for other persons to join as original participants.

[45 FR 6344, Jan. 25, 1980, as amended at 54 FR 50617, Dec. 8, 1989]



Sec. 251.6-4  Bonds.

    (a) When you apply to the Minerals Management Service (MMS) for a 
permit authorizing the drilling of a deep stratigraphic test well, you 
must either:
    (1) Furnish a bond of not less than $200,000 that guarantees 
compliance with all the terms and conditions of the permit; or
    (2) Maintain a $1 million bond that guarantees compliance with all 
the terms and conditions of the permits you hold for the OCS area where 
you propose to drill.
    (b) You must provide additional security to MMS if the Regional 
Director determines that it is necessary for the permit or area.

[[Page 397]]

    (c) The Regional Director may require you to provide a bond, in an 
amount the Regional Director prescribes, before authorizing you to drill 
a shallow test well.
    (d) Your bond must be on a form approved by the Associate Director 
for Offshore Minerals Management.

[62 FR 27955, May 22, 1997]

    Effective Date Note: At 62 FR 27955, May 22, 1997, Sec. 251.6-4 was 
revised, effective Aug. 20, 1997. For the convenience of the user, the 
superseded text is set forth as follows:

Sec. 251.6-4  Bonds.

    Before a permit authorizing the drilling of a deep stratigraphic 
test will be issued, the applicant shall furnish to the Minerals 
Management Service a corporate surety bond of not less than $50,000 
conditioned on compliance with the terms of the permit, unless the 
applicant maintains with or furnishes to the Minerals Management Service 
a bond in the sum of $300,000 conditioned on compliance with the terms 
of the permit issued to him for the area of the OCS where the applicant 
proposes to conduct the drilling of a deep stratigraphic test. The 
Director may require the submission of a bond before authorizing the 
initiation of shallow test drilling. Any bond furnished or maintained by 
a person under this section shall be on a form approved or prescribed by 
the Director, Minerals Management Service.



Sec. 251.6-5  Duration of exploration activities.

    If a deep stratigraphic test well is drilled within 50 geographic 
miles of any tract within the area identified for consideration for 
leasing as listed on the currently approved OCS Leasing Schedule, all 
drilling activities must be completed, and the information and data 
submitted to the Director at least 60 days prior to the first day of the 
month in which the lease sale is scheduled to be held. However, the 
Director may extend the expiration date of a permit if it is determined 
that such an extension is in the national interest.

[47 FR 15782, Apr. 13, 1982]
Sec. 251.7  Inspection and reporting of progress and results of 
activities conducted under permits.



Sec. 251.7-1  Inspection and observation of exploration activities.

    (a) A permittee, upon request by the Director, shall furnish food, 
quarters, and transportation for Federal representatives. Upon request, 
the permittee will be reimbursed by the United States for the actual 
costs incurred as a result of providing food, quarters, and 
transportation for a Federal representative's stay of more than 10 
hours. The Federal representative shall observe or inspect operations 
conducted pursuant to the permit and determine whether operations are 
having any adverse effects upon the environment, aquatic life, cultural 
resources, or other uses of the area.
    (b) The Federal representatives shall be appointed or approved by 
the Director.



Sec. 251.7-2  Progress report on activities conducted under a permit.

    Each permittee shall submit status reports on a monthly basis in a 
manner approved or prescribed by the Director. This shall include a 
daily log of operations.

[48 FR 37968, Aug. 22, 1983; 48 FR 40380, Sept. 7, 1983]



Sec. 251.7-3  Final report on activities conducted under a permit.

    Each permittee shall submit to the Director a final report of 
exploration or scientific research activities under the permit within 30 
days after the completion of operations. The final report shall contain 
the following:
    (a) A description of the work performed.
    (b) Charts, maps, or plats depicting the areas and blocks in which 
any exploration or scientific research activities were conducted, 
specifically identifying the lines of geophysical traverses or the 
locations where geological exploration or scientific research activities 
were conducted, including a

[[Page 398]]

reference sufficient to identify the data produced during each activity.
    (c) The dates on which the actual exploration or scientific research 
activities were performed.
    (d) A narrative summary of any: (1) Hydrocarbon occurrences or 
environmental hazards, and (2) adverse effects of the exploration or 
scientific research activities on the environment, aquatic life, 
cultural resources, or other uses of the area in which the activities 
were conducted.
    (e) Such other descriptions of the activities conducted as may be 
specified by the Director.



Sec. 251.8  Suspension and cancellation of authority to conduct activities under permit.

    (a) The Director may suspend or temporarily prohibit the permittee's 
authority to conduct exploration or scientific research activities under 
a permit by notifying the permittee either orally or in writing when the 
Director determines that there is a threat of serious, irreparable, or 
immediate harm or damage to life (including fish and other aquatic 
life), to property, to any mineral deposits (in areas leased or not 
leased), to the national security or defense, or to the marine, coastal, 
or human environment. Such suspensions shall be effective immediately 
upon receipt of the notice. Suspensions issued orally shall be followed 
by a written notice confirming the action, and all written notices will 
be sent by certified mail. A suspension shall remain in effect until the 
basis for the suspension has been corrected to the satisfaction of the 
Director.
    (b) The Director may suspend or temporarily prohibit the permittee's 
authority to conduct exploration or scientific research under a permit 
either orally or in writing when the Director determines the permittee 
fails to comply with a provision of the Act or of any applicable law, 
the provisions of the permit, provisions of these and other applicable 
regulations, OCS Orders, or any other written orders or field rules 
including orders for the filing of reports and well records or logs 
within the time specified. Such suspensions shall be effective 
immediately upon receipt of the notice. Suspensions issued orally shall 
be followed by a written notice confirming the action and all written 
notices shall be sent by certified mail. A suspension shall remain in 
effect until the basis for the suspension has been corrected to the 
satisfaction of the Director.
    (c)(1) The Director may cancel, or a permittee may relinquish, a 
permit to conduct exploration or scientific research activities at any 
time by sending a notice of cancellation or a notice of relinquishment. 
Such notices shall state the reason for the cancellation or 
relinquishment and shall be sent by certified mail to the other party at 
least 30 days in advance of the date the cancellation or relinquishment 
will be effective.
    (2) Cancellation of a permit to conduct exploration or scientific 
research activities shall not relieve the permittee of the obligation to 
abandon any drill sites in accordance with the requirements of 
Sec. 251.6-2(g) of this part and to comply with all other obligations 
specified in this part or in the permit.



Sec. 251.9  Penalties.

    All persons conducting geological or geophysical exploration 
activities for mineral resources or scientific research shall be subject 
to the penalty provisions of section 24 of the Act (43 U.S.C. 1350), the 
procedures contained in Sec. 250.80 of this chapter for noncompliance 
with any provision of the Act, or any provision of the permit, or for 
any violation of the provisions of any regulation or order issued under 
the Act. The penalties prescribed in this section shall be in addition 
to any other penalty afforded by any other law or regulation.



Sec. 251.10  Appeals.

    Orders or decisions issued under the regulations in this part may be 
appealed as provided in part 290 of this chapter.



Sec. 251.11  Inspection, selection, and submission of geological information and data.

    (a) Each holder of a permit for geological exploration activities 
for mineral resources or scientific research shall notify the Director 
in writing

[[Page 399]]

within 30 days of the acquisition, initial analysis, and initial 
interpretation of any geological information and data collected under 
the permit. Within 30 days following the receipt of the Director's 
request for notice of any subsequent analysis and interpretation of that 
geological information or data, the permittee shall submit notice of the 
availability of that information in writing.
    (b) Each submission of geological data, analyzed geological 
information, and interpreted geological information shall contain, 
unless otherwise specified by the Director, the following:
    (1) An accurate and complete record of all geological (including 
geochemical) data, analyzed geological information, and interpreted 
geological information resulting from each operation;
    (2) Paleontological reports identifying microscopic fossils by 
depth, unless washed samples are maintained by the permittee for 
paleontological determination and are made available upon request for 
inspection by the Minerals Management Service;
    (3) Copies of well logs or charts;
    (4) Results and data obtained from formation fluid tests;
    (5) Analyses of core or bottom samples or a representative cut or 
split of the core or bottom sample;
    (6) Detailed descriptions of any hydrocarbons or hazardous 
conditions encountered during operations, including near losses of well-
control, abnormal geopressures, and losses of circulation; and
    (7) Such other geological data, analyzed geological information, and 
interpreted geological information as may be specified by the Director.
    (c) In the event that geological data, analyzed geological 
information, or interpreted geological information is transferred from 
the permittee to a third party, or from a third party to another third 
party, the transferor shall notify the Director and shall require the 
receiving party, in writing, to abide by the obligations of the 
permittee as specified in this section as a condition precedent to the 
transfer of information or data.

[45 FR 6344, Jan. 25, 1980, as amended at 48 FR 46026, Oct. 11, 1983]



Sec. 251.12  Inspection, selection, and submission of geophysical information and data.

    (a) Each holder of a permit for geophysical exploration activities 
for mineral resources or scientific research shall notify the Director 
in writing within 30 days of the acquisition, initial processing, and 
initial interpretation of any geophysical information and data collected 
under the permit. Within 30 days following the receipt of the Director's 
request for notice of any reprocessing or subsequent interpretation of 
that geophysical information or data, the permittee shall submit notice 
of the availability of that information in writing.
    (b) The Director shall have the right to inspect geophysical data, 
processed geophysical information, reprocessed geophysical information, 
or interpreted geophysical information prior to final selection. This 
inspection shall be performed on the permittee's premises unless the 
Director requests that the permittee deliver the information or data to 
the Director for inspection. Such delivery shall be within 30 days 
following the receipt of the Director's request unless the Director 
authorizes a later delivery date. At any time prior to final selection, 
the Director may return any or all geophysical information or data 
following either its inspection and detailed assessment of its quality, 
or the establishment of a price to the Government for the processing or 
reprocessing of the geophysical information or data. If the Director 
decides to keep all or a portion of the geophysical information and 
data, the Director shall notify the permittee, in writing, of this 
decision. If the inspection is done on the permittee's premises, the 
permittee shall submit the geophysical information or data selected 
within 30 days following receipt of the Director's request, unless the 
Director authorizes a longer period of time for delivery. The Director 
shall have the right to arrange, by contract or otherwise, for the 
reproduction, without the consent of the permittee, of geophysical data, 
processed geophysical information, reprocessed geophysical information, 
and interpreted geophysical information.

[[Page 400]]

    (c) In the event that geophysical data, processed geophysical 
information, reprocessed geophysical information, or interpreted 
geophysical information is transferred from the permittee to a third 
party, or from a third party to another third party, the transferor 
shall notify the Director and shall require the receiving third party, 
in writing, to abide by the obligations of the permittee as specified in 
this section as a condition precedent to the transfer of information or 
data.
    (d) Each submission of geophysical data, processed geophysical 
information, reprocessed geophysical information, and interpreted 
geophysical information, shall contain, unless otherwise specified by 
the Director, the following:
    (1) An accurate and complete record of each geophysical survey 
conducted under the permit, including digital navigational data and 
final location maps of all survey stations;
    (2) All seismic data developed under a permit presented in a format 
and of a quality suitable for processing;
    (3) Processed geophysical information derived from seismic data with 
extraneous signals and interference removed, presented in a format and 
of a quality suitable for interpretive evaluation, reflecting state-of-
the-art processing techniques; and
    (4) Other geophysical data, processed geophysical information, 
reprocessed geophysical information, and interpreted geophysical 
information obtained from, but not limited to, shallow and deep 
subbottom profiles, bathymetry, sidescan sonar, gravity and magnetic 
surveys, and special studies such as refraction and velocity surveys.

[45 FR 6344, Jan. 25, 1980, as amended at 48 FR 46026, Oct. 11, 1983]



Sec. 251.13  Reimbursement to permittees.

    (a) After the delivery to the Director of geological data, analyzed 
geological information, interpreted geological information, geophysical 
data, processed geophysical information, reprocessed geophysical 
information, and interpreted geophysical information selected by the 
Director in accordance with Secs. 251.11 or 251.12, and upon receipt of 
a request for reimbursement and a determination by the Director that the 
requested reimbursement is proper, the permittee or third party shall be 
reimbursed for the reasonable costs of reproducing the selected 
information and data at the permittee's or third party's lowest rate or 
at the lowest commercial rate established in the area, whichever is 
less.
    (b) After the delivery to the Director of processed or reprocessed 
geophysical information selected and retained by the Director in 
accordance with Sec. 251.12(b) and upon receipt of a request for 
reimbursement and a determination that the requested reimbursement is 
proper, the permittee or third party shall be reimbursed for the 
reasonable costs attributable to processing and reprocessing such 
information (as distinguished from the cost of data acquisition) if the 
processing or reprocessing was in the form and manner of processing 
other than that used in the normal conduct of business at the Director's 
request.
    (c) Requests for reimbursement shall identify processing and 
reprocessing costs separate from acquisition costs.
    (d) The permittee or third party shall not be reimbursed for the 
costs of analyzing geological information or interpreting geological or 
geophysical information.

[47 FR 25331, June 11, 1982, as amended at 51 FR 17176, May 9, 1986]
Sec. 251.14  Disclosure of information and data submitted under permits.



Sec. 251.14-1  Disclosure of information and data to the public.

    (a) The Director shall make information and data available in 
accordance with the requirements and subject to the limitations of the 
Freedom of Information Act (5 U.S.C. 552) and the implementing 
regulations (43 CFR part 2), the requirements of the Act, and the 
regulations contained in 30 CFR part 250 (Oil and Gas and Sulphur 
Operations in the Outer Continental Shelf), this part, and 30 CFR part 
252 (Outer Continental Shelf Oil and Gas Information Program).
    (b) Except as specified in this section or in parts 250 and 252 of 
this chapter, no information or data determined by the Director to be 
exempt from public

[[Page 401]]

disclosure under paragraph (a) of this section shall be provided to any 
affected State or be made available to the executive of any affected 
local government or to the public unless the permittee and all persons 
to whom such permittee has sold the information or data under promise of 
confidentiality agree to such an action.
    (c) The Director shall disclose geological data, analyzed geological 
information, and interpreted geological information submitted under a 
permit as follows:
    (1) The Director shall immediately issue a public announcement when 
any significant hydrocarbon occurrences are detected or environmental 
hazards are encountered on unleased lands during drilling operations. In 
the case of significant hydrocarbon occurrences, the Director will 
announce such occurrences in a form and manner that will further the 
national interest without unduly damaging the competitive position of 
those conducting the drilling. Other information and data pertaining to 
the permit will be released according to the schedule provided in 
paragraph (c)(2) or (3) of this section.
    (2) The Director shall make available to the public all geological 
data, analyzed geological information, and interpreted geological 
information, except geological data, analyzed geological information, 
and interpreted geological information obtained from the drilling of a 
deep stratigraphic test, 10 years after the date of issuance of the 
permit under which the information and data was obtained.
    (d) The Director shall disclose geophysical data, processed 
geophysical information, reprocessed geophysical information, and 
interpreted geophysical information submitted under a permit, and 
retained by the Director, as follows:
    (1) The Director shall make geophysical data available to the public 
50 years after the date which the data are submitted.
    (2) The Director shall make processed geophysical information, 
reprocessed geophysical information, and interpreted geophysical 
information available to the public 25 years after the date which the 
information is submitted.
    (e) The Director shall make available to the public all geological 
and geophysical data and information and geophysical interpretations 
obtained from drilling a deep stratigraphic test or submitted in support 
of an application for a permit to drill a deep stratigraphic test, or 
which the permittee is required to obtain in order to conduct the 
drilling of a deep stratigraphic test, at the earliest of the following 
times: (1) 25 years after completion of the test, or (2) for a lease 
sale held after the test well is completed, 60 calendar days after the 
Department of the Interior executes the first lease for a block, any 
part of which is within 50 geographic miles (92.6 kilometers) of the 
site of the completed test.

[45 FR 6344, Jan. 25, 1980, as amended at 53 FR 4392, Feb. 16, 1988]



Sec. 251.14-2  Disclosure to independent contractors.

    The Director reserves the right to disclose any information or data 
acquired from a permittee to an independent contractor or agent for the 
purpose of reproducing, processing, reprocessing, or interpreting such 
information or data. When practicable, the Director shall notify the 
permittee who provided the information or data of intent to disclose the 
information or data to an independent contractor or agent. The 
Director's notice of intent will afford the permittee a period of not 
less than 5 working days within which to comment on the intended action. 
When the Director so notifies a permittee of the intent to disclose 
information or data to an independent contractor or agent, all other 
owners of such information or data shall be deemed to have been notified 
of the Director's intent. Prior to any such disclosure, the contractor 
or agent shall be required to execute a written commitment not to 
transfer or to otherwise disclose any information or data to anyone 
without the express consent of the Director. The contractor or agent 
shall be liable for any unauthorized use by or disclosure of information 
or data to third parties.

[[Page 402]]



Sec. 251.14-3  Sharing of information with affected States.

    (a) At the time of soliciting nominations for the leasing of lands 
within 3 geographic miles of the seaward boundary of any coastal State, 
the Director, pursuant to the provisions of Sec. 252.7(a)(4) and (b) of 
this chapter and sections 8(g) and 26(e) of the Act, shall provide the 
Governor of the State the following information that has been acquired 
by the Director on such lands proposed to be offered for leasing:
    (1) All information on the geographical, geological, and ecological 
characteristics of the areas and regions proposed to be offered for 
leasing;
    (2) An estimate of the oil and gas reserves in the areas proposed 
for leasing; and
    (3) An identification of any field, geological structure, or trap 
located within 3 miles of the seaward boundary of the State.
    (b) After the time of receipt of nominations for any area of the OCS 
within 3 geographic miles of the seaward boundary of any coastal State 
and tentative tract selection in accordance with the provisions of 43 
CFR parts 3313 and 3314, the Director, in consultation with the Governor 
of the State, shall determine whether any tracts being given further 
consideration for leasing may contain one or more oil or gas reservoirs 
underlying both the OCS and lands subject to the jurisdiction of the 
State.
    (c) At any time prior to a sale, information acquired by the 
Director that pertains to the identification of oil or gas pools or 
fields underlying both the Outer Continental Shelf and lands subject to 
the jurisdiction of any coastal State on tracts selected for leasing 
within 3 geographic miles of the seaward boundary of any such State will 
be shared, upon request and pursuant to the provisions of 
Sec. 252.7(a)(4) and (b) of this chapter and sections 8(g) and 26 of the 
Act, with the Governor of such State.
    (d) Knowledge obtained by a State official who receives information 
under paragraphs (a) and (b) of this section shall be subject to the 
requirements and limitations of the Freedom of Information Act (5 U.S.C. 
552) and the implementing regulations (43 CFR part 2), the Act, the 
regulations contained in 30 CFR part 250 (Oil and Gas and Sulphur 
Operations in the Outer Continental Shelf), the regulations in this part 
251 (Geological and Geophysical Explorations of the Outer Continental 
Shelf), and the regulations contained in 30 CFR part 252 (Outer 
Continental Shelf Oil and Gas Information Program).



Sec. 251.14-4  Disclosure of information and data relating to specific contractual commitments.

    All information and data already received by the Director and 
covered by a specific contractual commitment concerning its release 
shall be handled in a way consistent with the contractual commitment. In 
the event of any conflict between this provision and a provision of any 
other regulation in this part 251, or of any regulation in part 250 of 
this chapter, this provision shall govern.



PART 252--OUTER CONTINENTAL SHELF (OCS) OIL AND GAS INFORMATION PROGRAM--Table of Contents




Sec.
252.1  Purpose.
252.2  Definitions.
252.3  Oil and gas data and information to be provided for use in the 
          OCS Oil and Gas Information Program.
252.4  Summary Report to affected States.
252.5  Information to be made available to affected States.
252.6  Freedom of Information Act requirements.
252.7  Privileged and proprietary data and information to be made 
          available to affected States.

    Authority: OCS Lands Act, 43 U.S.C. 1331 et seq., as amended, 92 
Stat. 629; Freedom of Information Act, 5 U.S.C. 552; Sec. 252.3 also 
issued under Pub. L. 99-190 making continuing appropriations for Fiscal 
Year 1986, and for other purposes.

    Source: 44 FR 46408, Aug. 7, 1979, unless otherwise noted.



Sec. 252.1  Purpose.

    The purpose of this part is to implement the provisions of section 
26 of the Act (43 U.S.C. 1352). This part supplements the procedures and 
requirements contained in parts 250 and 251 of this chapter and provides 
procedures and requirements for the submission of oil

[[Page 403]]

and gas data and information resulting from exploration, development, 
and production operations on the Outer Continental Shelf (OCS) to the 
Director, Minerals Management Service. In addition, this part 
establishes procedures for the Director to make available certain 
information to the Governors of affected States and, upon request, to 
the executives of affected local governments in accordance with the 
provisions of the Freedom of Information Act and the Act.



Sec. 252.2  Definitions.

    When used in the regulations in this part, the following terms shall 
have the meanings given below:
    (a) Act refers to the Outer Continental Shelf Lands Act, as amended 
(43 U.S.C. 1331 et seq.).
    (b) Affected local government means the principal governing body of 
a locality which is in an affected State and is identified by the 
Governor of that State as a locality which will be significantly 
affected by oil and gas activities on the OCS.
    (c) Affected State means, with respect to any program, plan, lease 
sale, or other activity, proposed, conducted, or approved pursuant to 
the provisions of the Act, any State:
    (1) The laws of which are declared, pursuant to section 4(a)(2)(A) 
of the Act, to be the law of the United States for the portion of the 
OCS on which such activity is, or is proposed to be, conducted;
    (2) Which is, or is proposed to be, directly connected by 
transportation facilities to any artificial island or installations and 
other devices permanently, or temporarily attached to the seabed;
    (3) Which is receiving, or in accordance with the proposed activity 
will receive, oil for processing, refining, or transshipment which was 
extracted from the OCS and transported directly to such State by means 
of vessels or by a combination of means including vessels;
    (4) Which is designated by the Director as a State in which there is 
a substantial probability of significant impact on or damage to the 
coastal, marine, or human environment, or a State in which there will be 
significant changes in the social, governmental, or economic 
infrastructure, resulting from the exploration, development, and 
production of oil and gas anywhere on the OCS; or
    (5) In which the Director finds that because of such activity there 
is, or will be, a significant risk of serious damage, due to factors 
such as prevailing winds and currents, to the marine or coastal 
environment in the event of any oilspill, blowout, or release of oil or 
gas from vessels, pipelines, or other transshipment facilities.
    (d) Analyzed geological information means data collected under a 
permit or a lease which have been analyzed. Analysis may include, but is 
not limited to, identification of lithologic and fossil content, core 
analyses, laboratory analyses of physical and chemical properties, logs 
or charts of electrical, radioactive, sonic, and other well logs, and 
descriptions of hydrocarbon shows or hazardous conditions.
    (e) Area adjacent to a State means all of that portion of the OCS 
included within a planning area if such planning area is bordered by 
that State. The portion of the OCS in the Navarin Basin Planning Area is 
deemed to be adjacent to the State of Alaska. The States of New York and 
Rhode Island are deemed to be adjacent to both the Mid-Atlantic Planning 
Area and the North Atlantic Planning Area.
    (f) Data means facts and statistics or samples which have not been 
analyzed or processed.
    (g) Development means those activities which take place following 
discovery of oil or natural gas in paying quantities, including 
geophysical activity, drilling, platform construction, and operation of 
all onshore support facilities, and which are for the purpose of 
ultimately producing the oil and gas discovered.
    (h) Director means the Director of the Minerals Management Service 
of the U.S. Department of the Interior or a designee of the Director.
    (i) Exploration means the process of searching for oil and natural 
gas, including: (1) Geophysical surveys where magnetic, gravity, 
seismic, or other systems are used to detect or imply the presence of 
such oil or natural gas, and (2) any drilling, whether on or off

[[Page 404]]

known geological structures, including the drilling of a well in which a 
discovery of oil or natural gas in paying quantities is made and the 
drilling of any additional delineation well after such discovery which 
is needed to delineate any reservoir and to enable the lessee to 
determine whether to proceed with development and production.
    (j) Governor means the Governor of a State, or the person or entity 
designated by, or pursuant to, State law to exercise the powers granted 
to a Governor pursuant to the Act.
    (k) Information, when used without a qualifying adjective, includes 
analyzed geological information, processed geophysical information, 
interpreted geological information, and interpreted geophysical 
information.
    (l) Interpreted geological information means knowledge, often in the 
form of schematic cross sections and maps, developed by determining the 
geological significance of data and analyzed geological information.
    (m) Interpreted geophysical information means knowledge, often in 
the form of schematic cross sections and maps, developed by determining 
the geological significance of geophysical data and processed 
geophysical information.
    (n) Lease means any form of authorization which is issued under 
section 8 or maintained under section 6 of the Act and which authorizes 
exploration for, and development and production of, oil or natural gas, 
or the land covered by such authorization, whichever is required by the 
context.
    (o) Lessee means the party authorized by a lease, or an approved 
assignment thereof, to explore for and develop and produce the leased 
deposits in accordance with the regulations in part 250 of this chapter, 
including all parties holding such authority by or through the lessee.
    (p) Outer Continental Shelf (OCS) means all submerged lands which 
lie seaward and outside of the area of lands beneath navigable waters as 
defined in the Submerged Lands Act (67 Stat. 29) and of which the 
subsoil and seabed appertain to the United States and are subject to its 
jurisdiction and control.
    (q) Permittee means the party authorized by a permit issued pursuant 
to part 251 of this chapter to conduct activities on the OCS.
    (r) Processed geophysical information means data collected under a 
permit or a lease which have been processed. Processing involves 
changing the form of data so as to facilitate interpretation. 
Processsing operations may include, but are not limited to, applying 
corrections for known perturbing causes, rearranging or filtering data, 
and combining or transforming data elements.
    (s) Production means those activities which take place after the 
successful completion of any means for the removal of oil or natural 
gas, including such removal, field operations, transfer of oil or 
natural gas to shore, operation monitoring, maintenance, and workover 
drilling.
    (t) Secretary means the Secretary of the Interior or a designee of 
the Secretary.

[44 FR 46408, Aug. 7, 1979, as amended at 49 FR 10670, Mar. 22, 1984; 51 
FR 10382, Mar. 26, 1986]



Sec. 252.3  Oil and gas data and information to be provided for use in the OCS Oil and Gas Information Program.

    (a) Any permittee or lessee engaging in the activities of 
exploration for, or development and production of, oil and gas on the 
OCS shall provide the Director access to all data and information 
obtained or developed as a result of such activities, including 
geological data, geophysical data, analyzed geological information, 
processed and reprocessed geophysical information, interpreted 
geophysical information, and interpreted geological information. Copies 
of these data and information and any interpretation of these data and 
information shall be provided to the Director upon request. No permittee 
or lessee submitting an interpretation of data or information, where 
such interpretation has been submitted in good faith, shall be held 
responsible for any consequence of the use of or reliance upon such 
interpretation.
    (b)(1) Whenever a lessee or permittee provides any data or 
information, at

[[Page 405]]

the request of the Director and specifically for use in the OCS Oil and 
Gas Information Program in a form and manner of processing which is 
utilized by the lessee or permittee in the normal conduct of business, 
the Director shall pay the reasonable cost of reproducing the data and 
information if the lessee or permittee requests reimbursement. The cost 
shall be computed and paid in accordance with the applicable provisions 
of paragraph (e)(1) of this section.
    (2) Whenever a lessee or permittee provides any data or information, 
at the request of the Director and specifically for use in the OCS Oil 
and Gas Information Program, in a form and manner of processing not 
normally utilized by the lessee or permittee in the normal conduct of 
business, the Director shall pay the lessee or permittee, if the lessee 
or permittee requests reimbursement, the reasonable cost of processing 
and reproducing the requested data and information. The cost is to be 
computed and paid in accordance with the applicable provisions of 
paragraph (e)(2) of this section.
    (c) Data or information requested by the Director shall be provided 
as soon as practicable, but not later than 30 days following receipt of 
the Director's request, unless, for good reason, the Director authorizes 
a longer time period for the submission of the requested data or 
information.
    (d) The Director reserves the right to disclose any data or 
information acquired from a lessee or permittee to an independent 
contractor or agent for the purpose of reproducing, processing, 
reprocessing, or interpreting such data or information. When 
practicable, the Director shall notify the lessee(s) or permittee(s) who 
provided the data or information of the intent to disclose the data or 
information to an independent contractor or agent. The Director's notice 
of intent will afford the permittee(s) or lessee(s) a period of not less 
than 5 working days within which to comment on the intended action. When 
the Director so notifies a lessee or permittee of the intent to disclose 
data or information to an independent contractor or agent, all other 
owners of such data or information shall be deemed to have been notified 
of the Director's intent. Prior to any such disclosure, the contractor 
or agent shall be required to execute a written commitment not to 
disclose any data or information to anyone without the express consent 
of the Director, and not to make any disclosure or use of the data or 
information other than that provided in the contract. Contracts between 
the Minerals Management Service and independent contractors shall be 
available to the lessee(s) or permittee(s) for inspection. In the event 
of any unauthorized use or disclosure of data or information by the 
contractor or agent, or by an employee thereof, the responsible 
contractor or agent or employee thereof shall be liable for penalties 
pursuant to section 24 of the Act.
    (e)(1) After delivery of data or information in accordance with 
paragraph (b)(1) of this section and upon receipt of a request for 
reimbursement and a determination by the Director that the requested 
reimbursement is proper, the lessee or permittee shall be reimbursed for 
the cost of reproducing the data or information at the lessee's or 
permittee's lowest rate or at the lowest commercial rate established in 
the area, whichever is less. Requests for reimbursement must be made 
within 60 days of the delivery date of the data or information requested 
under paragraph (b)(1) of this section.
    (2) After delivery of data or information in accordance with 
paragraph (b)(3) of this section, and upon receipt of a request for 
reimbursement and a determination by the Director that the requested 
reimbursement is proper, the lessee or permittee shall be reimbursed for 
the cost of processing or reprocessing and of reproducing the requested 
data or information. Requests for reimbursement must be made within 60 
days of the delivery date of the data or information and shall be for 
only the costs attributable to processing or reprocessing and 
reproducing, as distinguished from the costs of data acquisition.
    (3) Requests for reimbursement are to contain a breakdown of costs 
in sufficient detail to allow separation of reproduction, processing, 
and reprocessing costs from acquisition and other costs.

[[Page 406]]

    (f) Each Federal Department or Agency shall provide the Director 
with any data which it has obtained pursuant to section 11 of the Act 
and any other information which may be necessary or useful to assist the 
Director in carrying out the provisions of the Act.

[44 FR 46408, Aug. 7, 1979, as amended at 51 FR 17176, May 9, 1986]



Sec. 252.4  Summary Report to affected States.

    (a) The Director, as soon as practicable after analysis, 
interpretation, and compilation of oil and gas data and information 
developed by the Minerals Management Service or furnished by lessees, 
permittees, or other government agencies, shall make available to 
affected States and, upon request, to the executive of any affected 
local government, a Summary Report of data and information designed to 
assist them in planning for the onshore impacts of potential OCS oil and 
gas development and production. The Director shall consult with affected 
States and other interested parties to define the nature, scope, 
content, and timing of the Summary Report. The Director may consult with 
affected States and other interested parties regarding subsequent 
revisions in the definition of the nature, scope, content, and timing of 
the Summary Report. The Summary Report shall not contain data or 
information which the Director determines is exempt from disclosure in 
accordance with this part. The Summary Report shall not contain data or 
information the release of which the Director determines would unduly 
damage the competitive position of the lessee or permittee who provided 
the data or information which the Director has processed, analyzed, or 
interpreted during the development of the Summary Report. The Summary 
Report shall include:
    (1) Estimates of oil and gas reserves; estimates of the oil and gas 
resources that may be found within areas which the Secretary has leased 
or plans to offer for lease; and when available, projected rates and 
volumes of oil and gas to be produced from leased areas;
    (2) Magnitude of the approximate projections and timing of 
development, if and when oil or gas, or both, is discovered;
    (3) Methods of transportation to be used, including vessels and 
pipelines and approximate location of routes to be followed; and
    (4) General location and nature of near-shore and onshore facilities 
expected to be utilized.
    (b) When the Director determines that significant changes have 
occurred in the information contained in a Summary Report, the Director 
shall prepare and make available the new or revised information to each 
affected State, and, upon request, to the executive of any affected 
local government.



Sec. 252.5  Information to be made available to affected States.

    (a) The Director shall prepare an index of OCS information (see 30 
CFR 256.10). The index shall list all relevant actual or proposed 
programs, plans, reports, environmental impact statements, nominations 
information, environmental study reports, lease sale information, and 
any similar type of relevant information, including modifications, 
comments, and revisions prepared or directly obtained by the Director 
under the Act. The index shall be sent to affected States and, upon 
request, to any affected local government. The public shall be informed 
of the availability of the index.
    (b) Upon request, the Director shall transmit to affected States, 
affected local governments, and the public a copy of any information 
listed in the index which is subject to the control of the Minerals 
Management Service, in accordance with the requirements and subject to 
the limitations of the Freedom of Information Act (5 U.S.C. 552) and 
implementing regulations. The Director shall not transmit or make 
available any information which he determines is exempt from disclosure 
in accordance with this part.

[44 FR 46408, Aug. 7, 1979, as amended at 54 FR 50617, Dec. 8, 1989]



Sec. 252.6  Freedom of Information Act requirements.

    (a) The Director shall make data and information available in 
accordance with the requirements and subject to

[[Page 407]]

the limitations of the Freedom of Information Act (5 U.S.C. 552), the 
regulations contained in 43 CFR part 2 (Records and Testimony), the 
requirements of the Act, and the regulations contained in 30 CFR part 
250 (Oil and Gas and Sulphur Operations in the Outer Continental Shelf) 
and 30 CFR part 251 (Geological and Geophysical Explorations of the 
Outer Continental Shelf).
    (b) Except as provided in Sec. 252.7 or in parts 250 and 251 of this 
chapter, no data or information determined by the director to be exempt 
from public disclosure under paragraph (a) of this section shall be 
provided to any affected State or be made available to the executive of 
any affected local government or to the public unless the lessee, or the 
permittee and all persons to whom such permittee has sold such data or 
information under promise of confidentiality, agree to such action.



Sec. 252.7  Privileged and proprietary data and information to be made available to affected States.

    (a)(1) The Governor of any affected State may designate an 
appropriate State official to inspect, at a regional location which the 
Director shall designate, any privileged or proprietary data or 
information received by the Director regarding any activity in an area 
adjacent to such State, except that no such inspection shall take place 
prior to the sale of a lease covering the area in which such activity 
was conducted.
    (2)(i) Except as provided for in 30 CFR 250.4 and 251.14, no 
privileged or proprietary data or information will be transmitted to any 
affected State unless the lessee who provided the privileged or 
proprietary data or information agrees in writing to the transmittal of 
the data or information.
    (ii) Except as provided for in 30 CFR 250.4 and 251.14, no 
privileged or proprietary data or information will be transmitted to any 
affected State unless the permittee and all persons to whom the 
permittee has sold the data or information under promise of 
confidentiality agree in writing to the transmittal of the data or 
information.
    (3) Knowledge obtained by a State official who inspects data or 
information under paragraph (a)(1) or who receives data or information 
under paragraph (a)(2) of this section shall be subject to the 
requirements and limitations of the Freedom of Information Act (5 U.S.C. 
552), the regulations contained in 43 CFR part 2 (Records and 
Testimony), the Act (92 Stat. 629), the regulations contained in 30 CFR 
part 250 (Oil and Gas and Sulphur Operations in the Outer Continental 
Shelf), the regulations contained in 30 CFR part 251 (Geological and 
Geophysical Explorations of the Outer Continental Shelf), and the 
regulations contained in this part 252 (Outer Continental Shelf Oil and 
Gas Information Program).
    (4) Prior to the transmittal of any privileged or proprietary data 
or information to any State, or the grant of access to a State official 
to such data or information, the Secretary shall enter into a written 
agreement with the Governor of the State in accordance with section 
26(e) of the Act (43 U.S.C. 1352). In that agreement the State shall 
agree, as a condition precedent to receiving or being granted access to 
such data or information to: (i) Protect and maintain the 
confidentiality of privileged or proprietary data and information in 
accordance with the laws and regulations listed in paragraph (a)(3) of 
this section; (ii) waive the defenses as set forth in paragraph (b)(2) 
of this section; and (iii) hold the United States harmless from any 
violations of the agreement to protect the confidentiality of privileged 
or proprietary data or information by the State or its employees or 
contractors.
    (b)(1) Whenever any employee of the Federal Government or of any 
State reveals in violation of the Act or of the provisions of the 
regulations implementing the Act, privileged or proprietary data or 
information obtained pursuant to the regulations in this chapter, the 
lessee or permittee who supplied such information to the Director or any 
other Federal official, and any person to whom such lessee or permittee 
has sold such data or information under the promise of confidentiality, 
may commence a civil action for damages in the appropriate district 
court of the United States against the Federal Government or such State, 
as the case may be. Any Federal or State

[[Page 408]]

employee who is found guilty of failure to comply with any of the 
requirements of this section shall be subject to the penalties described 
in section 24 of the Act (43 U.S.C. 1350).
    (2) In any action commenced against the Federal Government or a 
State pursuant to paragraph (b)(1) of this section, the Federal 
Government or such State, as the case may be, may not raise as a defense 
any claim of sovereign immunity, or any claim that the employee who 
revealed the privileged or proprietary data or information which is the 
basis of such suit was acting outside the scope of the person's 
employment in revealing such data or information.
    (c) If the Director finds that any State cannot or does not comply 
with the conditions described in the agreement entered into pursuant to 
paragraph (a)(4) of this section, the Director shall thereafter withhold 
transmittal and deny access for inspection of privileged or proprietary 
data or information to such State until the Director finds that such 
State can and will comply with those conditions.



PART 254--OIL-SPILL RESPONSE REQUIREMENTS FOR FACILITIES LOCATED SEAWARD OF THE COAST LINE--Table of Contents




                           Subpart A--General

Sec.
254.1  Who must submit a spill-response plan?
254.2  When must I submit a response plan?
254.3  May I cover more than one facility in my response plan?
254.4  May I reference other documents in my response plan?
254.5  General response plan requirements.
254.6  Definitions.
254.7  How do I submit my response plan to the MMS?
254.8  May I appeal decisions under this rule?
254.9  Authority for information collection.

    Subpart B--Oil-Spill Response Plans for Outer Continental Shelf 
                               Facilities

254.20  Purpose.
254.21  How must I format my response plan?
254.22  What information must I include in the ``Introduction and plan 
          contents'' section?
254.23  What information must I include in the ``Emergency response 
          action plan'' section?
254.24  What information must I include in the ``Equipment inventories'' 
          appendix?
254.25  What information must I include in the ``Contractual 
          agreements'' appendix?
254.26  What information must I include in the ``Worst case discharge 
          scenario'' appendix?
254.27  What information must I include in the ``Dispersant use plan'' 
          appendix?
254.28  What information must I include in the ``In situ burning plan'' 
          appendix?
254.29  What information must I include in the ``Training and drills'' 
          appendix?
254.30  When must I revise my response plan?

 Subpart C--Related Requirements for Outer Continental Shelf Facilities

254.40  Records.
254.41  Training your response personnel.
254.42  Exercises for your response personnel and equipment.
254.43  Maintenance and periodic inspection of response equipment.
254.44  Calculating response equipment effective daily recovery 
          capacities.
254.45  Verifying the capabilities of your response equipment.
254.46  Whom do I notify if an oil spill occurs?
254.47  Determining the volume of oil of your worst case discharge 
          scenario.

  Subpart D--Oil-Spill Response Requirements for Facilities Located in 
                 State Waters Seaward of the Coast Line

254.50  Spill-response plans for facilities located in State waters 
          seaward of the coast line.
254.51  Modifying an existing OCS response plan.
254.52  Following the format for an OCS response plan.
254.53  Submitting a response plan developed under State requirements.
254.54  Spill prevention for facilities located in State waters seaward 
          of the coast line.

    Authority: 33 U.S.C. 1321

    Source: 62 FR 13996, Mar. 25, 1997, unless otherwise noted.



                           Subpart A--General



Sec. 254.1  Who must submit a spill-response plan?

    (a) If you are the owner or operator of an oil handling, storage, or 
transportation facility, and it is located seaward of the coast line, 
you must submit a spill-response plan to MMS for

[[Page 409]]

approval. Your spill-response plan must demonstrate that you can respond 
quickly and effectively whenever oil is discharged from your facility. 
Refer to Sec. 254.6 for the definitions of ``oil,'' ``facility,'' and 
``coast line'' if you have any doubts about whether to submit a plan.
    (b) You must maintain a current response plan for an abandoned 
facility until you physically remove or dismantle the facility or until 
the Regional Supervisor notifies you in writing that a plan is no longer 
required.
    (c) Owners or operators of offshore pipelines carrying essentially 
dry gas do not need to submit a plan. You must, however, submit a plan 
for a pipeline that carries:
    (1) Oil;
    (2) Condensate that has been injected into the pipeline; or
    (3) Gas and naturally occurring condensate.
    (d) If you are in doubt as to whether you must submit a plan for an 
offshore facility or pipeline, you should check with the Regional 
Supervisor.
    (e) If your facility is located landward of the coast line, but you 
believe your facility is sufficiently similar to OCS facilities that it 
should be regulated by MMS, you may contact the Regional Supervisor, 
offer to accept MMS jurisdiction over your facility, and request that 
MMS seek from the agency with jurisdiction over your facility a 
relinquishment of that jurisdiction.



Sec. 254.2  When must I submit a response plan?

    (a) You must submit, and MMS must approve, a response plan that 
covers each facility located seaward of the coast line before you may 
use that facility. To continue operations, you must operate the facility 
in compliance with the plan.
    (b) Despite the provisions of paragraph (a) of this section, you may 
operate your facility after you submit your plan while MMS reviews it 
for approval. To operate a facility without an approved plan, you must 
certify in writing to the Regional Supervisor that you have the 
capability to respond, to the maximum extent practicable, to a worst 
case discharge or a substantial threat of such a discharge. The 
certification must show that you have ensured by contract, or other 
means approved by the Regional Supervisor, the availability of private 
personnel and equipment necessary to respond to the discharge. 
Verification from the organization(s) providing the personnel and 
equipment must accompany the certification. MMS will not allow you to 
operate a facility for more than 2 years without an approved plan.
    (c) If you have a plan that MMS already approved, you are not 
required to immediately rewrite the plan to comply with this part. You 
must, however, submit the information this regulation requires when 
submitting your first plan revision (see Sec. 254.30) after the 
effective date of this rule. The Regional Supervisor may extend this 
deadline upon request.



Sec. 254.3  May I cover more than one facility in my response plan?

    (a) Your response plan may be for a single lease or facility or a 
group of leases or facilities. All the leases or facilities in your plan 
must have the same owner or operator (including affiliates) and must be 
located in the same MMS Region (see definition of Regional Response Plan 
in Sec. 254.6).
    (b) Regional Response Plans must address all the elements required 
for a response plan in Subpart B, Oil Spill Response Plans for Outer 
Continental Shelf Facilities, or Subpart D, Oil Spill Response 
Requirements for Facilities Located in State Waters Seaward of the Coast 
Line, as appropriate.
    (c) When developing a Regional Response Plan, you may group leases 
or facilities subject to the approval of the Regional Supervisor for the 
purposes of:
    (1) Calculating response times;
    (2) Determining quantities of response equipment;
    (3) Conducting oil-spill trajectory analyses;
    (4) Determining worst case discharge scenarios; and
    (5) Identifying areas of special economic and environmental 
importance that may be impacted and the strategies for their protection.
    (d) The Regional Supervisor may specify how to address the elements 
of

[[Page 410]]

a Regional Response Plan. The Regional Supervisor also may require that 
Regional Response Plans contain additional information if necessary for 
compliance with appropriate laws and regulations.



Sec. 254.4  May I reference other documents in my response plan?

    You may reference information contained in other readily accessible 
documents in your response plan. Examples of documents that you may 
reference are the National Contingency Plan (NCP), Area Contingency Plan 
(ACP), MMS environmental documents, and Oil Spill Removal Organization 
(OSRO) documents that are readily accessible to the Regional Supervisor. 
You must ensure that the Regional Supervisor possesses or is provided 
with copies of all OSRO documents you reference. You should contact the 
Regional Supervisor if you want to know whether a reference is 
acceptable.



Sec. 254.5  General response plan requirements.

    (a) The response plan must provide for response to an oil spill from 
the facility. You must immediately carry out the provisions of the plan 
whenever there is a release of oil from the facility. You must also 
carry out the training, equipment testing, and periodic drills described 
in the plan, and these measures must be sufficient to ensure the safety 
of the facility and to mitigate or prevent a discharge or a substantial 
threat of a discharge.
    (b) The plan must be consistent with the National Contingency Plan 
and the appropriate Area Contingency Plan(s).
    (c) Nothing in this part relieves you from taking all appropriate 
actions necessary to immediately abate the source of a spill and remove 
any spills of oil.
    (d) In addition to the requirements listed in this part, you must 
provide any other information the Regional Supervisor requires for 
compliance with appropriate laws and regulations.



Sec. 254.6  Definitions.

    For the purposes of this part:
    Adverse weather conditions means weather conditions found in the 
operating area that make it difficult for response equipment and 
personnel to clean up or remove spilled oil or hazardous substances. 
These include, but are not limited to: Fog, inhospitable water and air 
temperatures, wind, sea ice, current, and sea states. It does not refer 
to conditions such as a hurricane, under which it would be dangerous or 
impossible to respond to a spill.
    Area Contingency Plan means an Area Contingency Plan prepared and 
published under section 311(j) of the Federal Water Pollution Control 
Act (FWPCA).
    Coast line means the line of ordinary low water along that portion 
of the coast which is in direct contact with the open sea and the line 
marking the seaward limit of inland waters.
    Discharge means any emission (other than natural seepage), 
intentional or unintentional, and includes, but is not limited to, 
spilling, leaking, pumping, pouring, emitting, emptying, or dumping.
    District Supervisor means the MMS officer with authority and 
responsibility for a district within an MMS Region.
    Facility means any structure, group of structures, equipment, or 
device (other than a vessel) which is used for one or more of the 
following purposes: Exploring for, drilling for, producing, storing, 
handling, transferring, processing, or transporting oil. The term 
excludes deep-water ports and their associated pipelines as defined by 
the Deepwater Port Act of 1974, but includes other pipelines used for 
one or more of these purposes. A mobile offshore drilling unit is 
classified as a facility when engaged in drilling or downhole 
operations.
    Maximum extent practicable means within the limitations of available 
technology, as well as the physical limitations of personnel, when 
responding to a worst case discharge in adverse weather conditions.
    National Contingency Plan means the National Oil and Hazardous 
Substances Pollution Contingency Plan prepared and published under 
section 311(d) of the FWPCA, (33 U.S.C. 1321(d)) or revised under 
section 105 of the Comprehensive Environmental Response Compensation and 
Liability Act (42 U.S.C. 9605).

[[Page 411]]

    National Contingency Plan Product Schedule means a schedule of 
dispersants and other chemical or biological products, maintained by the 
Environmental Protection Agency, that may be authorized for use on oil 
discharges in accordance with the procedures found at 40 CFR 300.910.
    Oil means oil of any kind or in any form, including but not limited 
to petroleum, fuel oil, sludge, oil refuse, and oil mixed with wastes 
other than dredged spoil. This also includes hydrocarbons produced at 
the wellhead in liquid form (includes distillates or condensate 
associated with produced natural gas), and condensate that has been 
separated from a gas prior to injection into a pipeline. It does not 
include petroleum, including crude oil or any fraction thereof, which is 
specifically listed or designated as a hazardous substance under 
paragraphs (A) through (F) of section 101(14) of the Comprehensive 
Environmental Response, Compensation, and Liability Act (42 U. S. C. 
9601) and which is subject to the provisions of that Act. It also does 
not include animal fats and oils and greases and fish and marine mammal 
oils, within the meaning of paragraph (2) of section 61(a) of title 13, 
United States Code, and oils of vegetable origin, including oils from 
the seeds, nuts, and kernels referred to in paragraph (1)(A) of that 
section.
    Oil spill removal organization (OSRO) means an entity contracted by 
an owner or operator to provide spill-response equipment and/or manpower 
in the event of an oil or hazardous substance spill.
    Outer Continental Shelf means all submerged lands lying seaward and 
outside of the area of lands beneath navigable waters as defined in 
section 2 of the Submerged Lands Act (43 U.S.C. 1301) and of which the 
subsoil and seabed appertain to the United States and are subject to its 
jurisdiction and control.
    Owner or operator means, in the case of an offshore facility, any 
person owning or operating such offshore facility. In the case of any 
abandoned offshore facility, it means the person who owned such facility 
immediately prior to such abandonment.
    Pipeline means pipe and any associated equipment, appurtenance, or 
building used or intended for use in the transportation of oil located 
seaward of the coast line, except those used for deep-water ports. 
Pipelines do not include vessels such as barges or shuttle tankers used 
to transport oil from facilities located seaward of the coast line.
    Qualified individual means an English-speaking representative of an 
owner or operator, located in the United States, available on a 24-hour 
basis, with full authority to obligate funds, carry out removal actions, 
and communicate with the appropriate Federal officials and the persons 
providing personnel and equipment in removal operations.
    Regional Response Plan means a spill-response plan required by this 
part which covers multiple facilities or leases of an owner or operator, 
including affiliates, which are located in the same MMS Region.
    Regional Supervisor means the MMS official with responsibility and 
authority for operations or other designated program functions within an 
MMS Region.
    Remove means containment and cleanup of oil from water and 
shorelines or the taking of other actions as may be necessary to 
minimize or mitigate damage to the public health or welfare, including, 
but not limited to, fish, shellfish, wildlife, public and private 
property, shorelines, and beaches.
    Spill is synonymous with ``discharge'' for the purposes of this 
part.
    Spill management team means the trained persons identified in a 
response plan who staff the organizational structure to manage spill 
response.
    Spill-response coordinator means a trained person charged with the 
responsibility and designated the commensurate authority for directing 
and coordinating response operations.
    Spill-response operating team means the trained persons who respond 
to spills through deployment and operation of oil-spill response 
equipment.
    State waters located seaward of the coast line means the belt of the 
seas measured from the coast line and extending seaward a distance of 3 
miles (except the coast of Texas and the Gulf

[[Page 412]]

coast of Florida, where the State waters extend seaward a distance of 3 
leagues).
    You means the owner or the operator as defined in this section.



Sec. 254.7  How do I submit my response plan to the MMS?

    You must submit the number of copies of your response plan that the 
appropriate MMS regional office requires. If you prefer to use improved 
information technology such as electronic filing to submit your plan, 
ask the Regional Supervisor for further guidance.
    (a) Send plans for facilities located seaward of the coast line of 
Alaska to: Minerals Management Service, Regional Supervisor, Field 
Operations, Alaska OCS Region, 949 East 36th Avenue, Anchorage, AK 
99508-4302.
    (b) Send plans for facilities in the Gulf of Mexico or Atlantic 
Ocean to: Minerals Management Service, Regional Supervisor, Field 
Operations, Gulf of Mexico OCS Region, 1201 Elmwood Park Boulevard, New 
Orleans, LA 70123-2394.
    (c) Send plans for facilities in the Pacific Ocean (except seaward 
of the coast line of Alaska) to: Minerals Management Service, Regional 
Supervisor, Office of Development Operations and Safety, Pacific OCS 
Region, 770 Paseo Camarillo, Camarillo, CA 93010-6064.



Sec. 254.8  May I appeal decisions under this rule?

    You may appeal orders or decisions issued under the regulations in 
this part pursuant to part 290 of this title. If you file an appeal with 
the Director, it does not suspend the requirement for you to comply with 
an order or decision other than one that requires the payment of a civil 
penalty. Compliance also is not suspended pending an appeal to the 
Interior Board of Land Appeals under 43 CFR part 4.



Sec. 254.9  Authority for information collection.

    (a) The Office of Management and Budget (OMB) has approved the 
information collection requirements in this part under 44 U.S.C. 3501 et 
seq. OMB assigned the control number 1010-0091. The title of this 
information collection is ``30 CFR Part 254, Oil Spill Response 
Requirements for Facilities Located Seaward of the Coast line.''
    (b) MMS collects this information to ensure that the owner or 
operator of an offshore facility is prepared to respond to an oil spill. 
MMS uses the information to verify compliance with the mandates of the 
Oil Pollution Act of 1990 (OPA). The requirement to submit this 
information is mandatory. No confidential or proprietary information is 
collected.
    (c) An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it displays a 
currently valid OMB control number.
    (d) Send comments regarding any aspect of the collection of 
information under this part, including suggestions for reducing the 
burden, to the Information Collection Clearance Officer, Minerals 
Management Service, Mail Stop 4230, Department of the Interior, 1849 C 
Streets, NW, Washington, DC 20240; and to the Office of Information and 
Regulatory Affairs, Office of Management and Budget, Attention: Desk 
Officer for the Department of the Interior (1010-0091), 725 17th Street, 
NW, Washington, DC 20503.

[62 FR 13996, Mar. 25, 1997, as amended at 62 FR 18041, Apr. 14, 1997]



    Subpart B--Oil-Spill Response Plans for Outer Continental Shelf 
                               Facilities



Sec. 254.20  Purpose.

    This subpart describes the requirements for preparing spill-response 
plans for facilities located on the OCS.



Sec. 254.21  How must I format my response plan?

    (a) You must divide your response plan for OCS facilities into the 
sections specified in paragraph (b) and explained in the other sections 
of this subpart. The plan must have an easily found marker identifying 
each section. You may use an alternate format if you include a cross-
reference table to identify the location of required sections. You may 
use alternate contents if you can demonstrate to the Regional Supervisor 
that they provide for equal or greater levels of preparedness.

[[Page 413]]

    (b) Your plan must include:
    (1) Introduction and plan contents.
    (2) Emergency response action plan.
    (3) Appendices:
    (i) Equipment inventory.
    (ii) Contractual agreements.
    (iii) Worst case discharge scenario.
    (iv) Dispersant use plan.
    (v) In situ burning plan.
    (vi) Training and drills.



Sec. 254.22  What information must I include in the ``Introduction and plan contents'' section?

    The ``Introduction and plan contents'' section must provide:
    (a) Identification of the facility the plan covers, including its 
location and type;
    (b) A table of contents;
    (c) A record of changes made to the plan; and
    (d) A cross-reference table, if needed, because you are using an 
alternate format for your plan.



Sec. 254.23  What information must I include in the ``Emergency response action plan'' section?

    The ``Emergency response action plan''section is the core of the 
response plan. Put information in easy-to-use formats such as flow 
charts or tables where appropriate. This section must include:
    (a) Designation, by name or position, of a trained qualified 
individual (QI) who has full authority to implement removal actions and 
ensure immediate notification of appropriate Federal officials and 
response personnel.
    (b) Designation, by name or position, of a trained spill management 
team available on a 24-hour basis. The team must include a trained 
spill-response coordinator and alternate(s) who have the responsibility 
and authority to direct and coordinate response operations on your 
behalf. You must describe the team's organizational structure as well as 
the responsibilities and authorities of each position on the spill 
management team.
    (c) Description of a spill-response operating team. Team members 
must be trained and available on a 24-hour basis to deploy and operate 
spill-response equipment. They must be able to respond within a 
reasonable minimum specified time. You must include the number and types 
of personnel available from each identified labor source.
    (d) A planned location for a spill-response operations center and 
provisions for primary and alternate communications systems available 
for use in coordinating and directing spill-response operations. You 
must provide telephone numbers for the response operations center. You 
also must provide any facsimile numbers and primary and secondary radio 
frequencies that will be used.
    (e) A listing of the types and characteristics of the oil handled, 
stored, or transported at the facility.
    (f) Procedures for the early detection of a spill.
    (g) Identification of procedures you will follow in the event of a 
spill or a substantial threat of a spill. The procedures should show 
appropriate response levels for differing spill sizes including those 
resulting from a fire or explosion. These will include, as appropriate:
    (1) Your procedures for spill notification. The plan must provide 
for the use of the oil spill reporting forms included in the Area 
Contingency Plan or an equivalent reporting form.
    (i) Your procedures must include a current list which identifies the 
following by name or position, corporate address, and telephone number 
(including facsimile number if applicable):
    (A) The qualified individual;
    (B) The spill-response coordinator and alternate(s); and
    (C) Other spill-response management team members.
    (ii) You must also provide names, telephone numbers, and addresses 
for the following:
    (A) OSRO's that the plan cites;
    (B) Federal, State, and local regulatory agencies that you must 
consult to obtain site specific environmental information; and
    (C) Federal, State, and local regulatory agencies that you must 
notify when an oil spill occurs.
    (2) Your methods to monitor and predict spill movement;
    (3) Your methods to identify and prioritize the beaches, waterfowl, 
other marine and shoreline resources, and areas of special economic and 
environmental importance;

[[Page 414]]

    (4) Your methods to protect beaches, waterfowl, other marine and 
shoreline resources, and areas of special economic or environmental 
importance;
    (5) Your methods to ensure that containment and recovery equipment 
as well as the response personnel are mobilized and deployed at the 
spill site;
    (6) Your methods to ensure that devices for the storage of recovered 
oil are sufficient to allow containment and recovery operations to 
continue without interruption;
    (7) Your procedures to remove oil and oiled debris from shallow 
waters and along shorelines and rehabilitating waterfowl which become 
oiled;
    (8) Your procedures to store, transfer, and dispose of recovered oil 
and oil-contaminated materials and to ensure that all disposal is in 
accordance with Federal, State, and local requirements; and
    (9) Your methods to implement your dispersant use plan and your in 
situ burning plan.



Sec. 254.24   What information must I include in the ``Equipment inventory'' appendix?

    Your ``Equipment inventory appendix'' must include:
    (a) An inventory of spill-response materials and supplies, services, 
equipment, and response vessels available locally and regionally. You 
must identify each supplier and provide their locations and telephone 
numbers.
    (b) A description of the procedures for inspecting and maintaining 
spill-response equipment in accordance with Sec. 254.43.



Sec. 254.25  What information must I include in the ``Contractual agreements'' appendix?

    Your ``Contractual agreements'' appendix must furnish proof of any 
contracts or membership agreements with OSRO's, cooperatives, spill-
response service providers, or spill management team members who are not 
your employees that you cite in the plan. To provide this proof, submit 
copies of the contracts or membership agreements or certify that 
contracts or membership agreements are in effect. The contract or 
membership agreement must include provisions for ensuring the 
availability of the personnel and/or equipment on a 24-hour-per-day 
basis.



Sec. 254.26  What information must I include in the ``Worst case discharge scenario'' appendix?

    The discussion of your worst case discharge scenario must include 
all of the following elements:
    (a) The volume of your worst case discharge scenario determined 
using the criteria in Sec. 254.47. Provide any assumptions made and the 
supporting calculations used to determine this volume.
    (b) An appropriate trajectory analysis specific to the area in which 
the facility is located. The analysis must identify onshore and offshore 
areas that a discharge potentially could affect. The trajectory analysis 
chosen must reflect the maximum distance from the facility that oil 
could move in a time period that it reasonably could be expected to 
persist in the environment.
    (c) A list of the resources of special economic or environmental 
importance that potentially could be impacted in the areas identified by 
your trajectory analysis. You also must state the strategies that you 
will use for their protection. At a minimum, this list must include 
those resources of special economic and environmental importance, if 
any, specified in the appropriate Area Contingency Plan(s).
    (d) A discussion of your response to your worst case discharge 
scenario in adverse weather conditions. This discussion must include:
    (1) A description of the response equipment that you will use to 
contain and recover the discharge to the maximum extent practicable. 
This description must include the types, location(s) and owner, 
quantity, and capabilities of the equipment. You also must include the 
effective daily recovery capacities, where applicable. You must 
calculate the effective daily recovery capacities using the methods 
described in Sec. 254.44. For operations at a drilling or production 
facility, your scenario must show how you will cope with the initial 
spill volume upon arrival at the scene and then support operations for a 
blowout lasting 30 days.

[[Page 415]]

    (2) A description of the personnel, materials, and support vessels 
that would be necessary to ensure that the identified response equipment 
is deployed and operated promptly and effectively. Your description must 
include the location and owner of these resources as well as the 
quantities and types (if applicable);
    (3) A description of your oil storage, transfer, and disposal 
equipment. Your description must include the types, location and owner, 
quantity, and capacities of the equipment; and
    (4) An estimation of the individual times needed for:
    (i) Procurement of the identified containment, recovery, and storage 
equipment;
    (ii) Procurement of equipment transportation vessel(s);
    (iii) Procurement of personnel to load and operate the equipment;
    (iv) Equipment loadout (transfer of equipment to transportation 
vessel(s));
    (v) Travel to the deployment site (including any time required for 
travel from an equipment storage area); and
    (vi) Equipment deployment.
    (e) In preparing the discussion required by paragraph (d) of this 
section, you must:
    (1) Ensure that the response equipment, materials, support vessels, 
and strategies listed are suitable, within the limits of current 
technology, for the range of environmental conditions anticipated at 
your facility; and
    (2) Use standardized, defined terms to describe the range of 
environmental conditions anticipated and the capabilities of response 
equipment. Examples of acceptable terms include those defined in 
American Society for Testing of Materials (ASTM) publication F625-94, 
Standard Practice for Describing Environmental Conditions Relevant to 
Spill Control Systems for Use on Water, and ASTM F818-93, Standard 
Definitions Relating to Spill Response Barriers.



Sec. 254.27  What information must I include in the ``Dispersant use plan'' appendix?

    Your dispersant use plan must be consistent with the National 
Contingency Plan Product Schedule and other provisions of the National 
Contingency Plan and the appropriate Area Contingency Plan(s). The plan 
must include:
    (a) An inventory and a location of the dispersants and other 
chemical or biological products which you might use on the oils handled, 
stored, or transported at the facility;
    (b) A summary of toxicity data for these products;
    (c) A description and a location of any application equipment 
required as well as an estimate of the time to commence application 
after approval is obtained;
    (d) A discussion of the application procedures;
    (e) A discussion of the conditions under which product use may be 
requested; and
    (f) An outline of the procedures you must follow in obtaining 
approval for product use.



Sec. 254.28  What information must I include in the ``In situ burning plan'' appendix?

    Your in situ burning plan must be consistent with any guidelines 
authorized by the National Contingency Plan and the appropriate Area 
Contingency Plan(s). Your in situ burning plan must include:
    (a) A description of the in situ burn equipment including its 
availability, location, and owner;
    (b) A discussion of your in situ burning procedures, including 
provisions for ignition of an oil spill;
    (c) A discussion of environmental effects of an in situ burn;
    (d) Your guidelines for well control and safety of personnel and 
property;
    (e) A discussion of the circumstances in which in situ burning may 
be appropriate;
    (f) Your guidelines for making the decision to ignite; and
    (g) An outline of the procedures you must follow to obtain approval 
for an in situ burn.



Sec. 254.29  What information must I include in the ``Training and drills'' appendix?

    Your ``Training and drills'' appendix must:
    (a) Identify and include the dates of the training provided to 
members of the spill-response management team and the qualified 
individual. The types

[[Page 416]]

of training given to the members of the spill-response operating team 
also must be described. The training requirements for your spill 
management team and your spill-response operating team are specified in 
Sec. 254.41. You must designate a location where you keep course 
completion certificates or attendance records for this training.
    (b) Describe in detail your plans for satisfying the exercise 
requirements of Sec. 254.42. You must designate a location where you 
keep the records of these exercises.



Sec. 254.30  When must I revise my response plan?

    (a) You must review your response plan at least every 2 years and 
submit all resulting modifications to the Regional Supervisor. If this 
review does not result in modifications, you must inform the Regional 
Supervisor in writing that there are no changes.
    (b) You must submit revisions to your plan for approval within 15 
days whenever:
    (1) A change occurs which significantly reduces your response 
capabilities;
    (2) A significant change occurs in the worst case discharge scenario 
or in the type of oil being handled, stored, or transported at the 
facility;
    (3) There is a change in the name(s) or capabilities of the oil 
spill removal organizations cited in the plan; or
    (4) There is a significant change to the Area Contingency Plan(s).
    (c) The Regional Supervisor may require that you resubmit your plan 
if the plan has become outdated or if numerous revisions have made its 
use difficult.
    (d) The Regional Supervisor will periodically review the equipment 
inventories of OSRO's to ensure that sufficient spill removal equipment 
is available to meet the cumulative needs of the owners and operators 
who cite these organizations in their plans.
    (e) The Regional Supervisor may require you to revise your plan if 
significant inadequacies are indicated by:
    (1) Periodic reviews (described in paragraph (d) of this section);
    (2) Information obtained during drills or actual spill responses; or
    (3) Other relevant information the Regional Supervisor obtained.



 Subpart C--Related Requirements for Outer Continental Shelf Facilities



Sec. 254.40  Records.

    You must make all records of services, personnel, and equipment 
provided by OSRO's or cooperatives available to any authorized MMS 
representative upon request.



Sec. 254.41  Training your response personnel.

    (a) You must ensure that the members of your spill-response 
operating team who are responsible for operating response equipment 
attend hands-on training classes at least annually. This training must 
include the deployment and operation of the response equipment they will 
use. Those responsible for supervising the team must be trained annually 
in directing the deployment and use of the response equipment.
    (b) You must ensure that the spill-response management team, 
including the spill-response coordinator and alternates, receives annual 
training. This training must include instruction on:
    (1) Locations, intended use, deployment strategies, and the 
operational and logistical requirements of response equipment;
    (2) Spill reporting procedures;
    (3) Oil-spill trajectory analysis and predicting spill movement; and
    (4) Any other responsibilities the spill management team may have.
    (c) You must ensure that the qualified individual is sufficiently 
trained to perform his or her duties.
    (d) You must keep all training certificates and training attendance 
records at the location designated in your response plan for at least 2 
years. They must be made available to any authorized MMS representative 
upon request.



Sec. 254.42  Exercises for your response personnel and equipment.

    (a) You must exercise your entire response plan at least once every 
3 years (triennial exercise). You may satisfy

[[Page 417]]

this requirement by conducting separate exercises for individual parts 
of the plan over the 3-year period; you do not have to exercise your 
entire response plan at one time.
    (b) In satisfying the triennial exercise requirement, you must, at a 
minimum, conduct:
    (1) An annual spill management team tabletop exercise. The exercise 
must test the spill management team's organization, communication, and 
decisionmaking in managing a response. You must not reveal the spill 
scenario to team members before the exercise starts.
    (2) An annual deployment exercise of response equipment identified 
in your plan that is staged at onshore locations. You must deploy and 
operate each type of equipment in each triennial period. However, it is 
not necessary to deploy and operate each individual piece of equipment.
    (3) An annual notification exercise for each facility that is manned 
on a 24- hour basis. The exercise must test the ability of facility 
personnel to communicate pertinent information in a timely manner to the 
qualified individual.
    (4) A semiannual deployment exercise of any response equipment which 
the MMS Regional Supervisor requires an owner or operator to maintain at 
the facility or on dedicated vessels. You must deploy and operate each 
type of this equipment at least once each year. Each type need not be 
deployed and operated at each exercise.
    (c) During your exercises, you must simulate conditions in the area 
of operations, including seasonal weather variations, to the extent 
practicable. The exercises must cover a range of scenarios over the 3-
year exercise period, simulating responses to large continuous spills, 
spills of short duration and limited volume, and your worst case 
discharge scenario.
    (d) MMS will recognize and give credit for any documented exercise 
conducted that satisfies some part of the required triennial exercise. 
You will receive this credit whether the owner or operator, an OSRO, or 
a Government regulatory agency initiates the exercise. MMS will give you 
credit for an actual spill response if you evaluate the response and 
generate a proper record. Exercise documentation should include the 
following information:
    (1) Type of exercise;
    (2) Date and time of the exercise;
    (3) Description of the exercise;
    (4) Objectives met; and
    (5) Lessons learned.
    (e) All records of spill-response exercises must be maintained for 
the complete 3-year exercise cycle. Records should be maintained at the 
facility or at a corporate location designated in the plan. Records 
showing that OSRO's and oil spill removal cooperatives have deployed 
each type of equipment also must be maintained for the 3-year cycle.
    (f) You must inform the Regional Supervisor of the date of any 
exercise required by paragraph (b)(1), (2), or (4) of this section at 
least 30 days before the exercise. This will allow MMS personnel the 
opportunity to witness any exercises.
    (g) The Regional Supervisor periodically will initiate unannounced 
drills to test the spill response preparedness of owners and operators.
    (h) The Regional Supervisor may require changes in the frequency or 
location of the required exercises, equipment to be deployed and 
operated, or deployment procedures or strategies. The Regional 
Supervisor may evaluate the results of the exercises and advise the 
owner or operator of any needed changes in response equipment, 
procedures, or strategies.
    (i) Compliance with the National Preparedness for Response Exercise 
Program (PREP) Guidelines will satisfy the exercise requirements of this 
section. Copies of the PREP document may be obtained from the Regional 
Supervisor.



Sec. 254.43  Maintenance and periodic inspection of response equipment.

    (a) You must ensure that the response equipment listed in your 
response plan is inspected at least monthly and is maintained, as 
necessary, to ensure optimal performance.
    (b) You must ensure that records of the inspections and the 
maintenance activities are kept for at least 2 years and are made 
available to any authorized MMS representative upon request.

[[Page 418]]



Sec. 254.44  Calculating response equipment effective daily recovery capacities.

    (a) You are required by Sec. 254.26(d)(1) to calculate the effective 
daily recovery capacity of the response equipment identified in your 
response plan that you would use to contain and recover your worst case 
discharge. You must calculate the effective daily recovery capacity of 
the equipment by multiplying the manufacturer's rated throughput 
capacity over a 24-hour period by 20 percent. This 20 percent efficiency 
factor takes into account the limitations of the recovery operations due 
to available daylight, sea state, temperature, viscosity, and 
emulsification of the oil being recovered. You must use this calculated 
rate to determine if you have sufficient recovery capacity to respond to 
your worst case discharge scenario.
    (b) If you want to use a different efficiency factor for specific 
oil recovery devices, you must submit evidence to substantiate that 
efficiency factor. Adequate evidence includes verified performance data 
measured during actual spills or test data gathered according to the 
provisions of Sec. 254.45 (b) and (c).



Sec. 254.45  Verifying the capabilities of your response equipment.

    (a) The Regional Supervisor may require performance testing of any 
spill-response equipment listed in your response plan to verify its 
capabilities if the equipment:
    (1) Has been modified;
    (2) Has been damaged and repaired; or
    (3) Has a claimed effective daily recovery capacity that is 
inconsistent with data otherwise available to MMS.
    (b) You must conduct any required performance testing of booms in 
accordance with MMS-approved test criteria. You may use the document 
``Test Protocol for the Evaluation of Oil-Spill Containment Booms,'' 
available from MMS, for guidance. Performance testing of skimmers also 
must be conducted in accordance with MMS approved test criteria. You may 
use the document ``Suggested Test Protocol for the Evaluation of Oil 
Spill Skimmers for the OCS,'' available from MMS, for guidance.
    (c) You are responsible for any required testing of equipment 
performance and for the accuracy of the information submitted.



Sec. 254.46  Whom do I notify if an oil spill occurs?

    (a) You must immediately notify the National Response Center (1-800-
424-8802) if you observe:
    (1) An oil spill from your facility;
    (2) An oil spill from another offshore facility; or
    (3) An offshore spill of unknown origin.
    (b) In the event of a spill of 1 barrel or more from your facility, 
you must orally notify the Regional Supervisor without delay. You also 
must report spills from your facility of unknown size but thought to be 
1 barrel or more.
    (1) If a spill from your facility not originally reported to the 
Regional Supervisor is subsequently found to be 1 barrel or more, you 
must then report it without delay.
    (2) You must file a written followup report for any spill from your 
facility of 1 barrel or more. The Regional Supervisor must receive this 
confirmation within 15 days after the spillage has been stopped. All 
reports must include the cause, location, volume, and remedial action 
taken. Reports of spills of more than 50 barrels must include 
information on the sea state, meteorological conditions, and the size 
and appearance of the slick. The Regional Supervisor may require 
additional information if it is determined that an analysis of the 
response is necessary.
    (c) If you observe a spill resulting from operations at another 
offshore facility, you must immediately notify the responsible party and 
the Regional Supervisor.



Sec. 254.47  Determining the volume of oil of your worst case discharge scenario.

    You must calculate the volume of oil of your worst case discharge 
scenario as follows:
    (a) For an oil production platform facility, the size of your worst 
case discharge scenario is the sum of the following:

[[Page 419]]

    (1) The maximum capacity of all oil storage tanks and flow lines on 
the facility. Flow line volume may be estimated; and
    (2) The volume of oil calculated to leak from a break in any 
pipelines connected to the facility considering shutdown time, the 
effect of hydrostatic pressure, gravity, frictional wall forces and 
other factors; and
    (3) The daily production volume from an uncontrolled blowout of the 
highest capacity well associated with the facility. In determining the 
daily discharge rate, you must consider reservoir characteristics, 
casing/production tubing sizes, and historical production and reservoir 
pressure data. Your scenario must discuss how to respond to this well 
flowing for 30 days as required by Sec. 254.26(d)(1).
    (b) For exploratory or development drilling operations, the size of 
your worst case discharge scenario is the daily volume possible from an 
uncontrolled blowout. In determining the daily discharge rate, you must 
consider any known reservoir characteristics. If reservoir 
characteristics are unknown, you must consider the characteristics of 
any analog reservoirs from the area and give an explanation for the 
selection of the reservoir(s) used. Your scenario must discuss how to 
respond to this well flowing for 30 days as required by 
Sec. 254.26(d)(1).
    (c) For a pipeline facility, the size of your worst case discharge 
scenario is the volume possible from a pipeline break. You must 
calculate this volume as follows:
    (1) Add the pipeline system leak detection time to the shutdown 
response time.
    (2) Multiply the time calculated in paragraph (c)(1) of this section 
by the highest measured oil flow rate over the preceding 12-month 
period. For new pipelines, you should use the predicted oil flow rate in 
the calculation.
    (3) Add to the volume calculated in paragraph (c)(2) of this section 
the total volume of oil that would leak from the pipeline after it is 
shut in. Calculate this volume by taking into account the effects of 
hydrostatic pressure, gravity, frictional wall forces, length of 
pipeline segment, tie-ins with other pipelines, and other factors.
    (d) If your facility which stores, handles, transfers, processes, or 
transports oil does not fall into the categories listed in paragraph 
(a), (b), or (c) of this section, contact the Regional Supervisor for 
instructions on the calculation of the volume of your worst case 
discharge scenario.



  Subpart D--Oil-Spill Response Requirements for Facilities Located in 
                 State Waters Seaward of the Coast Line.



Sec. 254.50  Spill response plans for facilities located in State waters seaward of the coast line.

    Owners or operators of facilities located in State waters seaward of 
the coast line must submit a spill-response plan to MMS for approval. 
You may choose one of three methods to comply with this requirement. The 
three methods are described in Secs. 254.51, 254.52, and 254.53.



Sec. 254.51  Modifying an existing OCS response plan.

    You may modify an existing response plan covering a lease or 
facility on the OCS to include a lease or facility in State waters 
located seaward of the coast line. Since this plan would cover more than 
one lease or facility, it would be considered a Regional Response Plan. 
You should refer to Sec. 254.3 and contact the appropriate regional MMS 
office if you have any questions on how to prepare this Regional 
Response Plan.



Sec. 254.52  Following the format for an OCS response plan.

    You may develop a response plan following the requirements for plans 
for OCS facilities found in subpart B of this part.



Sec. 254.53  Submitting a response plan developed under State requirements.

    (a) You may submit a response plan to MMS for approval that you 
developed in accordance with the laws or regulations of the appropriate 
State. The plan must contain all the elements the State and OPA require 
and must:
    (1) Be consistent with the requirements of the National Contingency

[[Page 420]]

Plan and appropriate Area Contingency Plan(s).
    (2) Identify a qualified individual and require immediate 
communication between that person and appropriate Federal officials and 
response personnel if there is a spill.
    (3) Identify any private personnel and equipment necessary to 
remove, to the maximum extent practicable, a worst case discharge as 
defined in Sec. 254.47. The plan must provide proof of contractual 
services or other evidence of a contractual agreement with any OSRO's or 
spill management team members who are not employees of the owner or 
operator.
    (4) Describe the training, equipment testing, periodic unannounced 
drills, and response actions of personnel at the facility. These must 
ensure both the safety of the facility and the mitigation or prevention 
of a discharge or the substantial threat of a discharge.
    (5) Describe the procedures you will use to periodically update and 
resubmit the plan for approval of each significant change.
    (b) Your plan developed under State requirements also must include 
the following information:
    (1) A list of the facilities and leases the plan covers and a map 
showing their location;
    (2) A list of the types of oil handled, stored, or transported at 
the facility;
    (3) Name and address of the State agency to whom the plan was 
submitted;
    (4) Date you submitted the plan to the State;
    (5) If the plan received formal approval, the name of the approving 
organization, the date of approval, and a copy of the State agency's 
approval letter if one was issued; and
    (6) Identification of any regulations or standards used in preparing 
the plan.



Sec. 254.54  Spill prevention for facilities located in State waters seaward of the coast line.

    In addition to your response plan, you must submit to the Regional 
Supervisor a description of the steps you are taking to prevent spills 
of oil or mitigate a substantial threat of such a discharge. You must 
identify all State or Federal safety or pollution prevention 
requirements that apply to the prevention of oil spills from your 
facility, and demonstrate your compliance with these requirements. You 
also should include a description of industry safety and pollution 
prevention standards your facility meets. The Regional Supervisor may 
prescribe additional equipment or procedures for spill prevention if it 
is determined that your efforts to prevent spills do not reflect good 
industry practices.



PART 256--LEASING OF SULPHUR OR OIL AND GAS IN THE OUTER CONTINENTAL SHELF--Table of Contents




  Subpart A--Outer Continental Shelf Oil, Gas, and Sulphur Management, 
                                 General

Sec.
256.0  Authority for information collection.
256.1  Purpose.
256.2  Policy.
256.4  Authority.
256.5  Definitions.
256.7  Cross references.
256.8  Leasing maps and diagrams.
256.10  Information to States.
256.11  Helium.
256.12  Supplemental sales.

                 Subpart B--Oil and Gas Leasing Program

256.14  Definitions.
256.16  Receipt and consideration of nominations; public notice and 
          participation.
256.17  Review by State and local governments and other persons.
256.19  Periodic consultation with interested parties.
256.20  Consideration of coastal zone management program.

                Subpart C--Reports From Federal Agencies

256.22  General.

             Subpart D--Call for Information and Nominations

256.23  Information on areas.
256.25  Areas near coastal States.

              Subpart E--Area Identification and Tract Size

256.26  General.
256.28  Tract size.

                         Subpart F--Lease Sales

256.29  Proposed notice of sale.

[[Page 421]]

256.31  State comments.
256.32  Notice of sale.

                      Subpart G--Issuance of Leases

256.35  Qualifications of lessees.
256.37  Lease term.
256.38  Joint bidding provisions.
256.40  Definitions.
256.41  Joint bidding requirements.
256.43  Chargeability for production.
256.44  Bids disqualified.
256.46  Submission of bids.
256.47  Award of leases.
256.49  Lease form.
256.50  Dating of leases.

               Subpart H--Rentals and Royalties [Reserved]

                           Subpart I--Bonding

256.52  Bond requirements for an oil and gas or sulphur lease.
256.53  Additional bonds.
256.54  General requirements for bonds.
256.55  Lapse of bond.
256.56  Lease-specific abandonment accounts.
256.57  Using a third-party guarantee instead of a bond.
256.58  Termination of the period of liability and cancellation of a 
          bond.
256.59  Forfeiture of bonds and/or other securities.

            Subpart J--Assignments, Transfers, and Extensions

256.62  Assignment of lease or interest in lease.
256.64  How to file transfers.
256.65  Attorney General review.
256.67  Separate filings for assignments.
256.68  Effect of assignment of a particular tract.
256.70  Extension of lease by drilling or well reworking operations.
256.71  Directional drilling.
256.72  Compensatory payments as production.
256.73  Effect of suspensions on lease term.

                    Subpart K--Termination of Leases

256.76  Relinquishment of leases or parts of leases.
256.77  Cancellation of leases.

                       Subpart L--Section 6 Leases

256.79  Effect of regulations on lease.
256.80  Leases of other minerals.

                           Subpart M--Studies

256.82  Environmental studies.

Appendix A to Part 256--Oil and Gas Cash Bonus Bid

    Authority: 43 U.S.C. 1331 et seq.

    Source: 44 FR 38276, June 29, 1979, unless otherwise noted. 
Redesignated at 47 FR 47006, Oct. 22, 1982.



  Subpart A--Outer Continental Shelf Oil, Gas, and Sulphur Management, 
                                 General



Sec. 256.0  Authority for information collection.

    The collections of information contained in part 256 have been 
approved by the Office of Management and Budget under 44 U.S.C. 3501 et 
seq. and assigned OMB control number 1010-0006. The information will be 
used to determine if the applicant filing for a lease on the Outer 
Continental Shelf (OCS) is qualified to hold such a lease. Response is 
required to obtain a benefit in accordance with 43 U.S.C. 1331 et seq. 
Public reporting burden for this information is estimated to average 1.8 
hours per response, including the time for reviewing instructions, 
searching existing data sources, gathering and maintaining the data 
needed, and completing and reviewing the collection of information. Send 
comments regarding this burden estimate or any other aspect of this 
collection of information, including suggestions for reducing the 
burden, to the Information Collection Clearance Officer; Minerals 
Management Service, Mail Stop 2300; 381 Elden Street; Herndon, Virginia 
22070-4817, and the Office of Management and Budget; Paperwork Reduction 
Project 1010-0006; Washington, DC 20503.

[58 FR 45261, Aug. 27, 1993]



Sec. 256.1  Purpose.

    The purpose of these regulations is to establish the procedures 
under which the Secretary of the Interior will exercise the authority 
granted to administer a leasing program for minerals and grant rights-
of-way on the submerged lands of the Outer Continental Shelf.



Sec. 256.2  Policy.

    The management of Outer Continental Shelf resources is to be 
conducted

[[Page 422]]

in accordance with the findings, purposes and policy directions provided 
by the Outer Continental Shelf Lands Act Amendments of 1978 (43 U.S.C. 
1332, 1801, 1802), and other Executive, legislative, judicial and 
Departmental guidance. The Secretary of the Interior shall consider 
available environmental information in making decisions affecting Outer 
Continental Shelf resources.



Sec. 256.4   Authority.

    The Outer Continental Shelf Lands Act as amended, (43 U.S.C. 1331 et 
seq.) authorizes the Secretary of the Interior to issue, on a 
competitive basis, leases for oil and gas, and sulphur, in submerged 
lands of the Outer Continental Shelf. The act authorizes the Secretary 
of the Interior to grant rights-of-way through the submerged lands of 
the Outer Continental Shelf. The Energy Policy and Conservation Act of 
1975 (42 U.S.C. 6213), prohibits joint bidding by major oil and gas 
producers.

[44 FR 38276, June 29, 1979. Redesignated at 47 FR 47006, Oct. 22, 1982 
and amended at 54 FR 2049, Jan. 18, 1989]



Sec. 256.5  Definitions.

    As used in this part, the term:
    (a) Act refers to the Outer Continental Shelf Lands Act of August 7, 
1953 (43 U.S.C. 1331 et seq.) as amended.
    (b) Director means the Director, Minerals Management Service.
    (c) OCS means the Outer Continental Shelf, as that term is defined 
in 43 U.S.C. 1331(a).
    (d) Secretary means the Secretary of the Interior or an official 
authorized to act on the Secretary's behalf.
    (e) MMS means the Minerals Management Service.
    (f) Coastal zone means the coastal waters (including the lands 
therein and thereunder) and the adjacent shorelands (including the 
waters therein and thereunder), strongly influenced by each other and in 
proximity to the shorelines of the several coastal States, and includes 
islands, transition and intertidal areas, salt marshes, wetlands, and 
beaches, which zone extends seaward to the outer limit of the United 
States territorial sea and extends inland from the shore lines to the 
extent necessary to control shorelands, the uses of which have a direct 
and significant impact on the coastal waters, and the inward boundaries 
of which may be identified by the several coastal States, pursuant to 
the authority of section 305(b)(1) of the Coastal Zone Management Act of 
1972 (16 U.S.C. 1454(b)(1));
    (g) Affected State means, with respect to any program, plan, lease 
sale, or other activity, proposed, conducted, or approved pursuant to 
the provisions of the act, any State--
    (1) The laws of which are declared, pursuant to section 4(a)(2) of 
the Act, to be the law of the United States for the portion of the Outer 
Continental Shelf on which such activity is, or is proposed to be 
conducted;
    (2) Which is, or is proposed to be, directly connected by 
transportation facilities to any artificial island or structure referred 
to in section 4(a)(1) of the Act;
    (3) Which is receiving, or in accordance with the proposed activity 
will receive, oil for processing, refining, or transshipment which was 
extracted from the Outer Continental Shelf and transported directly to 
such State by means of vessels or by a combination of means including 
vessels;
    (4) Which is designated by the Secretary as a State in which there 
is a substantial probability of significant impact on or damage to the 
coastal, marine, or human environment, or a State in which there will be 
significant changes in the social, governmental, or economic 
infrastructure, resulting from the exploration, development, and 
production of oil and gas anywhere on the Outer Continental Shelf; or
    (5) In which the Secretary finds that because of such activity there 
is, or will be, a significant risk of serious damage, due to factors 
such as prevailing winds and currents, to the marine or coastal 
environment in the event of any oilspill, blowout, or release of oil or 
gas from vessels, pipelines, or other transshipment facilities;
    (h) Marine environment means the physical, atmospheric, and 
biological components, conditions, and factors which interactively 
determine the productivity, state, conditions, and quality of the marine 
ecosystem, including

[[Page 423]]

the waters of the high seas, the contiguous zone, transitional and 
intertidal areas, salt marshes, and wetlands within the coastal zone and 
on the Outer Continental Shelf;
    (i) Coastal environment means the physical, atmospheric, and 
biological components, conditions, and factors which interactively 
determine the productivity, state, conditions, and quality of the 
terrestrial ecosystem from the shoreline inward to the boundaries of the 
coastal zone;
    (j) Human environment means the physical, social, and economic 
components, conditions, and factors which interactively determine the 
state, condition, and quality of living conditions, employment, and 
health of those affected, directly or indirectly, by activities 
occurring on the Outer Continental Shelf;
    (k) Mineral means oil, gas, and sulphur; it includes sand and gravel 
and salt used to facilitate the development and production of oil, gas, 
or sulphur.
    (l) Authorized officer means any person authorized by law or by 
delegation of authority to or within MMS to perform the duties described 
in this part.

[44 FR 38276, June 29, 1979. Redesignated and amended at 47 FR 47006, 
47007, Oct. 22, 1982; 54 FR 2049, Jan. 18, 1989]



Sec. 256.7  Cross references.

    (a) For Minerals Management Service regulations governing 
exploration, development and production on leases, see 30 CFR parts 250 
and 270.
    (b) For MMS regulations governing the appeal of an order or decision 
issued under the regulations in this part, see 30 CFR part 290.
    (c) For multiple use conflicts, see the Environmental Protection 
Agency listing of ocean dumping sites--40 CFR part 228.
    (d) For related National Oceanic and Atmospheric Administration 
programs see:
    (1) Marine sanctuary regulations, 15 CFR part 922;
    (2) Fishermen's Contingency Fund, 50 CFR part 296;
    (3) Coastal Energy Impact Program, 15 CFR part 931;
    (e) For Coast Guard regulations on the oil spill liability of 
vessels and operators, see 33 CFR parts 132, 135, and 136.
    (f) For Coast Guard regulations on port access routes, see 33 CFR 
part 164.
    (g) For compliance with the National Environmental Policy Act, see 
40 CFR parts 1500 through 1508.
    (h) For Department of Transportation regulations on offshore 
pipeline facilities, see 49 CFR part 195.
    (i) For Department of Defense regulations on military activities on 
offshore areas, see 32 CFR part 252.

[44 FR 38276, June 29, 1979. Redesignated at 47 FR 47006, Oct. 22, 1982, 
and amended at 54 FR 50617, Dec. 8, 1989; 55 FR 32908, Aug. 13, 1990; 62 
FR 27955, May 22, 1997]

    Effective Date Note: At 62 FR 27955, May 22, 1997, Sec. 256.7 was 
amended by redesignating paragraphs (b) through (h) as (c) through (i) 
and adding a new paragraph (b), effective Aug. 20, 1997.



Sec. 256.8  Leasing maps and diagrams

    (a) Any area of the OCS which has been appropriately platted as 
provided in paragraph (b) of this section, is subject to lease for any 
mineral not included in a subsisting lease issued under the act or 
meeting the requirements of subsection (a) of section 6 of the Act. 
Before any lease is offered or issued an area may be (1) withdrawn from 
disposition pursuant to section 12(a) of the Act, or (2) designated as 
an area or part of an area restricted from operation under section 12(d) 
of the Act.
    (b) The MMS shall prepare leasing maps and official protraction 
diagrams of areas of the OCS. The areas included in each mineral lease 
shall be in accordance with the appropriate leasing map or official 
protraction diagram.



Sec. 256.10  Information to States.

    (a) The information covered in this section is prepared by or 
directly obtained by the Director. Such information is typically not 
considered to be proprietary or privileged, with the primary exception 
of specific indications of interest in an area by industry received in 
response to a Call for Information issued by the Secretary. This 
information and all other proprietary and privileged information 
obtained by or under the control of the Minerals Management Service may 
be released

[[Page 424]]

only in accordance with the regulations in 30 CFR parts 250, 251, and 
252.
    (b) The Director shall prepare an index to OCS information (see 30 
CFR 252.5). The index shall list all relevant actual or proposed 
programs, plans, reports, environmental impact statements, nominations 
information, environmental study reports, lease sale information and any 
similar type of relevant information including, modifications, comments 
and revisions, prepared by or directly obtained by the Director under 
the act. The index shall be sent on a regular basis to affected States 
and, upon request, it shall be sent to any affected local government. 
The public shall be informed of the availability of the index.
    (c) Upon request, the Director shall transmit to affected States, 
local governments or the public, a copy of any information listed in the 
index which is subject to the control of the MMS in accordance with the 
requirements and subject to the limitations of the Freedom of 
Information Act (5 U.S.C. 552) and regulations implementing said Act, 
and the regulations contained in 43 CFR part 2, except as provided in 
paragraph (d) of this section.
    (d) Upon request, the Director shall provide relative indications of 
interest in areas as well as any comments filed in response to a Call 
for Information for a proposed sale. However, no information transmitted 
shall identify any particular area with the name of any particular party 
so as not to compromise the competitive position of any participants in 
the process of indicating interest.

[44 FR 38276, June 29, 1979, as amended at 47 FR 25970, June 16, 1982. 
Redesignated and amended at 47 FR 47006, 47007, Oct. 22, 1982]



Sec. 256.11  Helium.

    (a) Each lease issued or continued under these regulations shall be 
subject to a reservation by the United States, under section 12(f) of 
the Act, of the ownership of and the right to extract helium from all 
gas produced from the leased area.
    (b) In case the United States elects to take the helium, the lessee 
shall deliver all gas containing helium, or the portion of gas desired, 
to the United States at any point on the leased area or at an onshore 
processing facility. Delivery shall be made in the manner required by 
the United States to such plants or reduction works as the United States 
may provide.
    (c) The extraction of helium shall not cause a reduction in the 
value of the lessee's gas or any other loss for which he is not 
reasonably compensated, except for the value of the helium extracted. 
The United States shall determine the amount of reasonable compensation. 
The United States shall have the right to erect, maintain and operate on 
the leased area any and all reduction works and other equipment 
necessary for the extraction of helium. The extraction of helium shall 
not cause substantial delays in the delivery of natural gas produced to 
the purchaser of that gas.



Sec. 256.12  Supplemental sales.

    (a) The Secretary may conduct a supplemental sale in accordance with 
the provisions of this section.
    (b) Supplemental sales shall be governed by the regulations in this 
part, except Sec. 256.22.
    (c) Supplemental sales shall be limited to blocks falling into one 
or more of the following categories:
    (1) Blocks for which bids were rejected during the calendar year 
preceding the year of the supplemental sale in which they are reoffered 
or blocks for which bids were rejected in the same calendar year as the 
supplemental sale in which they are reoffered, except that for the 
initial supplemental sale only blocks for which bids were rejected after 
October 1, 1987, may be reoffered. If, after the initial supplemental 
sale, a supplemental sale is not held annually for any reason, the 
relevant period for determining blocks eligible for a subsequent 
supplemental sale may be extended to include rejected bid blocks which 
were eligible for the supplemental sale not held.
    (2) Blocks for which the high bid was forfeited during the calendar 
year preceding the year of the supplemental sale in which they are 
reoffered or blocks for which high bids were forfeited in the same 
calendar year as the supplemental sale in which they are reoffered, 
except that for the initial supplemental sale only blocks for which

[[Page 425]]

high bids were forfeited after October 1, 1987, may be reoffered. If, 
after the initial supplemental sale, a supplemental sale is not held 
annually for any reason, the relevant period for determining blocks 
eligible for a subsequent sale may be extended to include forfeited bid 
blocks which were eligible for the supplemental sale not held.
    (3) Development blocks. Development blocks (including blocks 
susceptible to drainage) are blocks which are located on the same 
general geologic structure as an existing lease having a well with 
indicated hydrocarbons; the reservoir may or may not be interpreted to 
extend on to the block.
    (d) Supplemental sales shall not include blocks in the Central or 
Western Gulf of Mexico Planning Areas.
    (e) The Director may disclose the classification of blocks in 
supplemental sales as development blocks.

[53 FR 29886, Aug. 9, 1988]



                 Subpart B--Oil and Gas Leasing Program



Sec. 256.14  Definitions.

    As used in this subpart, the term--Affected State and affected 
States means Maine, New Hampshire, Massachusetts, Rhode Island, 
Connecticut, New York, New Jersey, Pennsylvania, Delaware, Maryland, 
Virginia, North Carolina, South Carolina, Georgia, Florida, Alabama, 
Mississippi, Louisiana, Texas, California, Oregon, Washington, and 
Alaska.

[44 FR 38276, June 29, 1979. Redesignated at 47 FR 47006, Oct. 22, 1982; 
47 FR 50684, Nov. 9, 1982]



Sec. 256.16  Receipt and consideration of nominations; public notice and participation.

    (a) During preparation of a proposed 5-year leasing program, the 
Secretary shall invite and consider suggestions and relevant information 
for such program from Governors of affected States, local government, 
industry, other Federal agencies, including the Attorney General in 
consultation with the Federal Trade Commission, and all interested 
parties, including the general public. This request for information 
shall be issued as a notice in the Federal Register. Local governments 
wishing to respond to such request shall first submit their responses to 
the Governor of the State in which the local government is located.
    (b) The Secretary shall send letters to the Governors of the 
affected States requesting them to identify specific laws, goals, and 
policies which they believe should be considered by the Secretary in 
connection with the leasing program. The Secretary shall also request 
from the Secretary of Energy information on regional and national energy 
markets, on OCS production goals and on transportation networks.

[44 FR 38276, June 29, 1979. Redesignated at 47 FR 47006, Oct. 22, 1982; 
47 FR 50684, Nov. 9, 1982]



Sec. 256.17  Review by State and local governments and other persons.

    (a)(1) The Secretary shall prepare a proposed leasing program. At 
least 60 days prior to publication of the proposed program in the 
Federal Register, a copy of the draft of the proposed program shall be 
forwarded to the Governor of each affected State for comment. The 
Governor may solicit comments from local governments in his or her State 
which the Governor determines will be affected by the proposed program.
    (2) The Secretary shall reply in writing to any comment on the draft 
of the proposed program from the Governor of an affected State which is 
received at least 15 days prior to the submission of the proposed 
program to the Congress and publication in the Federal Register. All 
such correspondence between the Secretary and Governor of such State 
shall accompany the proposed program when it is submitted to the 
Congress.
    (b) The proposed leasing program shall be submitted to the Governors 
of the affected States for review and comment at the time it is 
submitted to the Congress and the Attorney General and published in the 
Federal Register. The Governor of an affected State shall, upon request 
from any local government affected by the program, submit a copy of the 
proposed program to such local government. Comments and recommendations 
on any aspect of the proposed program may be submitted by

[[Page 426]]

a State or local government or other persons to the Secretary within 90 
days after the date of its publication in the Federal Register. Comments 
and recommendations from local governments shall be submitted first to 
the Governor of the State in which the local government is located.
    (c) At least 60 days prior to approving the final leasing program 
and any later significant revision, the Secretary shall submit it to the 
President and the Congress, together with any comments. The Secretary 
shall indicate in such submission why any specific recommendation of the 
Attorney General or of a State or local government was not accepted.

[44 FR 38276, June 29, 1979, as amended at 47 FR 25970, June 16, 1982. 
Redesignated at 47 FR 47006, Oct. 22, 1982; 47 FR 50684, Nov. 9, 1982]



Sec. 256.19  Periodic consultation with interested parties.

    The Secretary shall provide for periodic consultation with State and 
local governments, existing and potential oil and gas lessees and 
permittees, and representatives of other individuals or organizations 
engaged in any activity in or on the OCS, including those involved in 
fish and shellfish recovery, and recreational activities. This 
consultation shall take place primarily through appropriate public 
notice as described in Secs. 256.16 and 256.17 and through the OCS 
Advisory Board and its committees, on a regional and national basis. 
Meetings of the OCS Advisory Board shall be held on specific issues as 
required by the Board's charter.

[44 FR 38276, June 29, 1979. Redesignated at 47 FR 47006, Oct. 22, 1982; 
47 FR 50684, Nov. 9, 1982]



Sec. 256.20  Consideration of coastal zone management program.

    In the development of the leasing program, consideration shall be 
given to the coastal zone management program being developed or 
administered by an affected coastal State under section 305 or 306 of 
the Coastal Zone Management Act of 1972 as amended, (16 U.S.C. 1454, 
1455). Information concerning the relationship between a State's coastal 
zone management program and OCS oil and gas activity shall be requested 
from the Governors of the affected coastal States and from the Secretary 
of Commerce prior to the development of the proposed leasing program at 
the time information is requested under Sec. 256.16 of this part.

[44 FR 38276, June 29, 1979. Redesignated at 47 FR 47006, Oct. 22, 1982; 
47 FR 50684, Nov. 9, 1982]



                Subpart C--Reports From Federal Agencies



Sec. 256.22  General.

    For oil and gas lease sales shown in an approved leasing schedule 
and as the need arises for other mineral leasing, the Director shall 
prepare a report describing the general geology and potential mineral 
resources of the area under consideration. The Director may request 
other interested Federal Agencies to prepare reports describing, to the 
extent known, any other valuable resources contained within the general 
area and the potential effect of mineral operations upon the resources 
or upon the total environment or other uses of the area.

[51 FR 6107, Feb. 20, 1986]



             Subpart D--Call for Information and Nominations



Sec. 256.23  Information on areas.

    (a) The Director may receive and consider indications of interest in 
areas for mineral leasing.
    (b) In accordance with an approved program and schedule for the 
leasing of OCS lands which may contain oil and gas, the Director shall 
issue Calls for Information and Nominations on areas for leasing of such 
minerals in specified areas. The Call for Information and Nominations 
shall be published in the Federal Register and may be published in other 
publications as desirable. Information on areas shall be addressed to 
the appropriate regional Minerals Manager of the Minerals Management 
Service with a copy to any other office which may be specified in the 
Call. The Director shall also request comments on areas which should 
receive special concern and analysis. For an oil and gas lease sale Call 
Area, the Director may request comments

[[Page 427]]

concerning geological conditions, including bottom hazards; 
archaeological sites on the seabed or nearshore; multiple uses of the 
proposed leasing area, including navigation, recreation, and fisheries; 
and other socioeconomic, biological, and environmental information.

[47 FR 25970, June 16, 1982. Redesignated at 47 FR 47006, Oct. 22, 1982 
and amended at 51 FR 21345, June 12, 1986; 59 FR 53094, Oct. 21, 1994]



Sec. 256.25  Areas near coastal States.

    (a) At the time information is solicited for leasing of areas within 
3 geographical miles seaward of the seaward boundary of any coastal 
State, the Secretary shall provide the Governor of that State 
information required under section 8(g)(1) of the Act. The Director 
shall furnish information identifying the areas for leasing as well as 
all relevant available environmental data for such areas (See 30 CFR 
251.14).
    (b) After receipt of information on areas within the area described 
in paragraph (a) of this section, the Secretary shall inform the 
Governor of those areas that are to be given further consideration for 
leasing. The Secretary shall enter into consultation with the Governor 
to determine whether the area may contain oil or gas pools or fields 
underlying both the OCS and lands subject to the jurisdiction of the 
State.
    (c) After selection for leasing of those tracts which may have oil 
or gas pools or fields underlying both the OCS and lands under State 
jurisdiction, the Secretary shall offer the Governor an opportunity to 
enter into an agreement for the equitable disposition of revenues from 
such tracts under section 8(g)(2) of the Act.
    (d) If no agreement can be reached within 90 days of the Secretary's 
offer, the tracts may be leased and all revenues deposited in a separate 
Treasury account pending equitable disposition of the revenues under 
sections 8(g) (3) and (4) of the Act.

[44 FR 38276, June 29, 1979, as amended at 47 FR 25971, June 16, 1982. 
Redesignated at 47 FR 47006, Oct. 22, 1982]



              Subpart E--Area Identification and Tract Size



Sec. 256.26  General.

    (a) The Director, in consultation with appropriate Federal Agencies, 
shall recommend to the Secretary areas identified for environmental 
analysis and consideration for leasing. The Director, on his/her own 
motion, may include in the recommendation areas in which interest has 
not been indicated in response to a call. In making a recommendation, 
the Director shall consider all available environmental information, 
multiple-use conflicts, resource potential, industry interest and other 
relevant information. Comments received from States and local 
governments and interested parties in response to calls for information 
and nominations shall be considered in making recommendations. For 
supplemental sales provided for by Sec. 256.12 of this part, the 
Director's recommendation shall be replaced by a statement describing 
the results of the Director's consideration of the factors specified 
above in this section.
    (b) The Director shall evaluate fully the potential effect of 
leasing on the human, marine and coastal environments, and develop 
measures to mitigate adverse impacts, including lease stipulations. The 
views and recommendations of Federal agencies, State agencies, local 
governments, organizations, industries and the general public shall be 
used as appropriate. The Director may hold public hearings on the 
environmental analysis after appropriate notice.
    (c) In general, the Director shall seek to inform the public as soon 
as possible of additions or deletions that occur after the 
identification of areas.

[47 FR 25971, June 16, 1982. Redesignated at 47 FR 47006, Oct. 22, 1982 
and amended at 51 FR 21345, June 12, 1986; 53 FR 29886, Aug. 9, 1988]



Sec. 256.28  Tract size.

    (a) A tract selected for oil and gas leasing shall consist of a 
compact area not exceeding 5,760 acres, unless the authorized officer 
finds that a larger area is necessary to comprise a reasonable economic 
production unit.

[[Page 428]]

    (b) The tract size for the leasing of other minerals shall be 
specified in the notice of sale.

[47 FR 25971, June 16, 1982. Redesignated at 47 FR 47006, Oct. 22, 1982]



                         Subpart F--Lease Sales



Sec. 256.29  Proposed notice of sale.

    (a) The Director shall in consultation with appropriate Federal 
agencies develop measures, including lease stipulations and conditions, 
to mitigate adverse impacts on the environments. For oil and gas lease 
sales, appropriate proposed stipulations and conditions shall be 
contained or referenced in the proposed notice of lease sale.
    (b) A proposed notice of lease sale shall be submitted to the 
Secretary for approval. All comments and recommendations received and 
the Director's findings or actions thereon, shall also be forwarded to 
the Secretary.
    (c) Upon approval by the Secretary, the proposed Notice of Sale 
shall be sent to the Governor of any affected State and a notice of its 
availability shall be published in the Federal Register.

[44 FR 38276, June 29, 1979, as amended at 47 FR 25971, June 16, 1982. 
Redesignated at 47 FR 47006, Oct. 22, 1982, and amended at 51 FR 37178, 
Oct. 20, 1986]



Sec. 256.31  State comments.

    (a) Within 60 days after notice of a proposed lease sale, a Governor 
of any affected State or any affected local government in such State may 
submit recommendations to the Secretary regarding the size, timing or 
location of the proposed lease sale. Prior to submitting recommendations 
to the Secretary, any affected local government shall forward such 
recommendation to the Governor.
    (b) The Secretary shall accept such recommendations of the Governor 
and may accept recommendations of any affected local government if he 
determines, after having provided the opportunity for consultation, that 
they provide for a reasonable balance between the national interest and 
the well-being of the citizens of the affected State. A determination of 
the national interest shall be based on the findings, purposes and 
policies of the Act.
    (c) The Secretary shall communicate to the Governor, in writing, the 
reasons for his determination to accept or reject such Governor's 
recommendations, or to implement any alternative means identified in 
consultation with the Governor to provide for a reasonable balance 
between the national interest and the well-being of the citizens of the 
affected State.



Sec. 256.32  Notice of sale.

    (a) Upon approval of the Secretary, the Director shall publish the 
notice of lease sale in the Federal Register as the official 
publication, and may publish the notice in other publications. The 
publication in the Federal Register shall be at least 30 days prior to 
the date of the sale. The notice shall state the place and time at which 
bids shall be filed, and the place, date and hour at which bids shall be 
opened. The notice shall contain or reference a description of the areas 
to be offered for lease and any stipulations, terms and conditions of 
the sale.
    (b) Tracts shall be offered for lease by competitive sealed bidding 
under conditions specified in the notice of lease sale and in accordance 
with all applicable laws and regulations. A suggested format for bidder 
submissions appears in appendix A of this part.
    (c) The notice of lease sale shall contain a reference to the OCS 
lease form which shall be issued to successful bidders.
    (d) With the approval of the Secretary, the Director may defer any 
part of the payment of the cash bonus according to a schedule announced 
at the time of the notice of lease sale. Payment shall be made no later 
than 5 years after the date of the lease sale. The schedule shall 
contain provisions for guaranteed payment of a deferred bonus.
    (e) In order to obtain statistical information to determine which 
bidding alternatives best accomplish the purposes and policies of the 
Act, the Director may, until September 18, 1983, require each bidder to 
submit bids for any OCS area in accordance with more than one of the 
bidding systems described in section 8(a)(1) of the Act. No

[[Page 429]]

more than 10 percent of the tracts offered each year shall contain such 
a requirement. Leases may be awarded using a bidding alternative 
selected at random for statistical purposes, if it is otherwise 
consistent with the purposes and policies of the Act.

[44 FR 38276, June 29, 1979. Redesignated and amended at 47 FR 25971, 
June 16, 1982. Further redesignated at 47 FR 47006, Oct. 22, 1982]



                      Subpart G--Issuance of Leases



Sec. 256.35  Qualifications of lessees.

    (a) In accordance with section 8 of the Act, leases shall be awarded 
only to the highest responsible qualified bidder.
    (b) Mineral leases issued pursuant to section 8 of the Act may be 
held only by: (1) Citizens and nationals of the United States, (2) 
aliens lawfully admitted for permanent residence in the United States as 
defined in 8 U.S.C. 1101(a)(20); (3) private, public or municipal 
corporations organized under the laws of the United States or of any 
State or of the District of Columbia or territory thereof, or (4) 
associations of such citizens, nationals, resident aliens, or private, 
public, or municipal corporations, States, or political subdivisions of 
States.



Sec. 256.37  Lease term.

    (a)(1) All oil and gas leases shall be issued for an initial period 
of 5 years, or not to exceed 10 years where the authorized officer finds 
that such longer period is necessary to encourage exploration and 
development in areas because of unusually deep water or other unusually 
adverse conditions.
    (2) If your oil and gas lease is in water depths between 400 and 800 
meters, it will have an initial lease term of 8 years unless MMS 
establishes a different lease term under paragraph (a)(1) of this 
section.
    (3) For leases issued with an initial term of 8 years, you must 
begin an exploratory well within the first 5 years of the term to avoid 
lease cancellation.
    (b) An oil and gas lease shall continue after such initial period 
for as long as oil or gas is produced from the lease in paying 
quantities, or drilling or well reworking operations as approved by the 
Secretary are conducted. The term of an oil and gas lease is subject to 
further extension as provided in Sec. 256.73 of this part.
    (c) Sulphur leases shall be issued for a term not to exceed 10 years 
and so long thereafter as sulphur is produced from the leasehold in 
paying quantities, or drilling, well reworking, plant construction, or 
other operations for the production of sulphur, as approved by the 
Secretary, are conducted thereon.

[44 FR 38276, June 29, 1979. Redesignated at 47 FR 47006, Oct. 22, 1982 
and amended at 50 FR 49043, Nov. 29, 1985; 54 FR 2049, Jan. 18, 1989; 61 
FR 55889, Oct. 30, 1996]



Sec. 256.38  Joint bidding provisions.



Sec. 256.40  Definitions.

    The following definitions shall be applicable to Sec. 256.38 of this 
part:
    (a) Single bid means a bid submitted by one person for an oil and 
gas lease under section 8(a) of the Act.
    (b) Joint bid means a bid submitted by two or more persons for an 
oil and gas lease under section 8(a) of the Act.
    (c) Average daily production is the total of all production in an 
applicable production period which is chargeable under Sec. 256.43 of 
this title divided by the exact number of calendar days in the 
applicable production period.
    (d) Barrel means 42 U.S. gallons.
    (e) Crude oil means a mixture of liquid hydrocarbons including 
condensate that exists in natural underground reservoirs and remains 
liquid at atmospheric pressure after passing through surface separating 
facilities, but does not include liquid hydrocarbons produced from tar 
sand, gilsonite, oil shale, or coal.
    (f) An economic interest means any right to, or any right dependent 
upon, production of crude oil, natural gas, or liquefied petroleum 
products and shall include, but not be limited to, a royalty interest, 
or overriding royalty interest, whether payable in cash or in kind, a 
working interest, a net profits interest, a production payment, or a 
carried interest.
    (g) Liquefied petroleum products means natural gas liquid products 
including the following: ethane, propane, butane, pentane, natural 
gasoline, and other

[[Page 430]]

natural gas products recovered by a process of absorption, adsorption, 
compression, or refrigeration cycling, or a combination of such 
processes.
    (h) Natural gas means a mixture of hydrocarbons and varying 
quantities of nonhydrocarbons that exist in the gaseous phase.
    (i) Oil and gas lease means an oil and gas lease either offered or 
issued pursuant to the provisions of the Act.
    (j) Owned means:
    (1) With respect to crude oil--having either an economic interest in 
or a power of disposition over the production of crude oil;
    (2) With respect to natural gas--having either an economic interest 
in or a power of disposition over the production of natural gas; and
    (3) With respect to liquefied petroleum products--having either an 
economic interest in or a power of disposition over any liquefied 
petroleum product at the time of completion of the liquefaction process.
    (k) Prior production period means the continuous six month period of 
January 1 through June 30 preceding November 1 through April 30 for 
joint bids submitted during the six month bidding period from November 1 
through April 30, and means the continuous six month period of July 1 
through December 31 preceding May 1 through October 31 for joint bids 
submitted during the six month bidding period from May 1 through October 
31.
    (l) Production--(1) Of crude oil means the volume of crude oil 
produced worldwide from reservoirs during the prior production period. 
The amount of such crude oil production shall be established by 
measurement of volumes delivered at the point of custody transfer (e.g., 
from storage tanks to pipelines, trucks, tankers, or other media for 
transport to refineries or terminals) with adjustments for:
    (i) Net differences between opening and closing inventories, and
    (ii) Basic sediment and water;
    (2) Of natural gas means the volume of natural gas produced 
worldwide from natural oil and gas reservoirs during the prior 
production period, with adjustments, where applicable, to reflect
    (i) The volume of gas returned to natural reservoirs; and
    (ii) The reduction of volume resulting from the removal of natural 
gas liquids and nonhydrocarbon gases.
    (3) Of liquefied petroleum products means the volume of natural gas 
liquids produced from reservoir gas and liquefied at surface separators, 
field facilities, or gas processing plants worldwide during the prior 
production period; these liquefied petroleum products include the 
following:
    (i) Condensate--natural gas liquids recovered from gas well gas 
(associated and non-associated) in separators or field facilities;
    (ii) Gas plant products--natural gas liquids recovered from natural 
gas in gas processing plants and from field facilities. Gas plant 
products shall include the following as classified according to the 
standards of the Natural Gas Processors Association (NGPA) or the 
American Society for Testing and Materials (ASTM):
    (A) Ethane--C2H6
    (B) Propane--C3H8
    (C) Butane--C4H10 including all products 
covered by NGPA specifications for commercial butane.
    (1) Isobutane,
    (2) Normal butane,
    (3) Other butanes--all butanes not included as isobutane or normal 
butane;
    (D) Butane-Propane Mixtures--All products covered by NGPA 
specifications for butane-propane mixtures;
    (E) Natural Gasoline--A mixture of hydrocarbons extracted from 
natural gas, which meet vapor pressure, end point, and other 
specifications for natural gasoline set by NGPA;
    (F) Plant Condensate--A natural gas plant product recovered and 
separated as a liquid at gas inlet separators or scrubbers in processing 
plants or field facilities; and
    (G) Other Natural Gas Plant Products meeting refined product 
standards (i.e., gasoline, kerosene, distillate, etc.).
    (m) Six month bidding period means the six month period of time
    (1) From May 1 through October 31; or
    (2) From November 1 through April 30, respectively.

[44 FR 38276, June 29, 1979; 44 FR 55380, Sept. 26, 1979. Redesignated 
at 47 FR 47006, Oct. 22, 1982]

[[Page 431]]



Sec. 256.41  Joint bidding requirements.

    (a) Any person who submits a joint bid for any oil and gas lease 
during a 6-month bidding period, and who was chargeable for the prior 
production period with an average daily production in excess of 1.6 
million barrels of crude oil, natural gas and liquified petroleum 
products, shall have filed under oath with the Director, a Statement of 
Production of crude oil, natural gas and liquified petroleum products, 
hereinafter referred to as a Statement of Production, no later than 45 
days prior to the commencement of the applicable 6-month bidding period 
of May 1 through October 31, and November 1 through April 30. Statements 
of Production shall be submitted to the Director, MMS (Attention: 
Offshore Leasing Management Division), Washington, DC 20240. The 
Statement of Production shall indicate that the person was chargeable, 
in accordance with Sec. 256.43 of this part, with an average daily 
production in excess of 1.6 million barrels of crude oil, natural gas 
and liquified petroleum products for the prior production period. The 
Director shall publish semi-annually in the Federal Register a ``List of 
Restricted Joint Bidders'' to be effective immediately upon publication 
and to continue in force and effect until a subsequent list is 
published. The ``List of Restricted Joint Bidders'' shall consist of 
those persons, who in the judgment of the Director, based on information 
available to him, including, but not limited to, sworn Statements of 
Production, are chargeable under Sec. 256.43 of this part with an 
average daily production in excess of 1.6 million barrels of crude oil, 
natural gas and liquified petroleum products for the prior production 
period.
    (b) When a person is placed on the List of Restricted Joint Bidders 
the Director shall serve that person either personally or by certified 
mail, return receipt requested, with a copy of the Director's Order 
placing that person on the List of Restricted Joint Bidders. Any appeal 
from that Order or from an adverse effect of that Order shall be made in 
accordance with the provisions of 43 CFR part 4.
    (c) The submission of a Statement of Production or of a detailed 
Report of Production under Sec. 256.46(g) of this part which 
misrepresents the chargeable production of the reporting person shall 
constitute failure to comply with these regulations and any lease 
awarded in reliance on that Statement or Report of Production may be 
canceled, pursuant to section 8(o) of the Act and regulations issued 
thereunder as having been obtained by fraud or misrepresention.
    (d) The Secretary may exempt a person from the provisions of 
Secs. 256.41(a), 256.44, 256.46(g) and 256.62(b) of this part if it is 
found, on the record, after an opportunity for an agency hearing, that 
lands being offered have extremely high cost exploration and development 
problems and that exploration and development will not occur on such 
lands unless the exemption is granted.

[44 FR 38276, June 29, 1979; 44 FR 55380, Sept. 26, 1979, as amended at 
45 FR 69174, Oct. 17, 1980; 47 FR 25971, June 16, 1982. Redesignated and 
amended at 47 FR 47006, 47007, Oct. 22, 1982]



Sec. 256.43  Chargeability for production.

    (a) As used in this section the following definitions shall control:
    (1) Person means a natural person or company.
    (2) Company means a corporation, a partnership, an association, a 
joint-stock company, a trust, a fund, or any group of persons whether 
incorporated or not; it also means any receiver, trustee in bankruptcy, 
or similar official acting for such a company.
    (3) Subsidiary means a company 50 percent or more of whose stock or 
other interest having power to vote for the election of directors, 
trustees, or other similar controlling body of the company is directly 
or indirectly owned, controlled, or held with the power to vote by 
another company; a subsidiary shall be deemed a subsidiary of the other 
company owning, controlling, or holding 50 percent or more of the stock 
or other voting interest.
    (4) Security or securities means any note, stock, treasury stock, 
bond, debenture, evidence of indebtedness, certificate of interest or 
participation in any profit-sharing agreement, collateral-trust 
certificate, pre-organization certificate or subscription, transferable

[[Page 432]]

share, investment contract, voting-trust certificate, certificate of 
deposit for a security, fractional undivided interest in oil, gas, or 
other mineral rights, or, in general, any interest or instrument 
commonly known as a ``security'' or any certificate of interest or 
participation in, temporary or interim certificate for, receipt for, 
guarantee of, or warrant or right to subscribe to or purchase any of the 
foregoing.
    (b) A person filing a Statement of Production under Sec. 256.41 of 
this part shall be charged with the following production during the 
applicable prior production period:
    (1) The average daily production in barrels of crude oil, natural 
gas, and liquefied petroleum products which it owned worldwide;
    (2) The average daily production in barrels of crude oil, natural 
gas, and liquefied petroleum products owned worldwide by every 
subsidiary of the reporting person;
    (3) The average daily production in barrels of crude oil, natural 
gas, and liquefied petroleum products owned worldwide by any person or 
persons of which the reporting person is a subsidiary; and
    (4) The average daily production in barrels of crude oil, natural 
gas, and liquefied petroleum products owned worldwide by any subsidiary, 
other than the reporting person, of any person or persons of which the 
reporting person is a subsidiary.
    (c) A person filing a Statement of Production shall be charged with, 
in addition to the production chargeable under paragraph (b) of this 
section, but not in duplication thereof, its proportionate share of the 
average daily production in barrels of crude oil, natural gas, and 
liquefied petroleum products owned worldwide by every person:
    (1) Which has an interest in the reporting person, and
    (2) In which the reporting person has an interest, whether the 
interest referred to in paragraphs (c) (1) and (2) of this section is by 
virtue of ownership of securities or other evidence of ownership, or by 
participation in any contract, agreement, or understanding respecting 
the control of any person or of any person's production of crude oil, 
natural gas, or liquefied petroleum products, equal to said interest. As 
used in paragraph (c) of this section ``interest'' means an interest of 
at least 5 percent of the ownership or control of a person.
    (d) All measurements of crude oil and liquefied petroleum products 
under this section shall be at 60 deg. F.
    (e)(1) For purposes of computing production of natural gas under 
Sec. 256.41 of this part, chargeability under this section, and 
reporting under Sec. 256.46(g) of this part, 5,626 cubic feet of natural 
gas at 14.73 pounds per square inch (msl) shall equal one barrel.
    (2) For purposes of computing production of liquefied petroleum 
products under Sec. 256.41 of this part, chargeability under 
Sec. 256.46(g) of this part, 1.454 barrels of natural gas liquids at 
60 deg. F shall equal one barrel of crude oil.

[44 FR 38276, June 29, 1979; 44 FR 55380, Sept. 26, 1979, as amended at 
47 FR 25971, June 16, 1982. Redesignated at 47 FR 47006, 47007, Oct. 22, 
1982]



Sec. 256.44  Bids disqualified.

    The following bids for any oil and gas lease shall be disqualified 
and rejected in their entirety:
    (a) A joint bid submitted by 2 or more persons who are on the 
effective List of Restricted Joint Bidders; or
    (b)(1) A joint bid submitted by two or more persons when 1 or more 
of those persons is chargeable for the prior production period with an 
average daily production in excess of 1.6 million barrels of crude oil, 
natural gas and liquified petroleum products and has not filed a 
Statement of Production as required by Sec. 256.41 of this part for the 
applicable 6-month bidding period, or
    (2) Any of those persons have failed or refused to file a detailed 
report of production when required to do so under Sec. 256.46(g) of this 
part, or
    (c) A single or joint bid submitted pursuant to an agreement 
(whether written or oral, formal or informal, entered into or arranged 
prior to or simultaneously with the submission of such single or joint 
bid, or prior to or simultaneously with the award of the bid upon the 
tract) which provides:
    (1) For the assignment, transfer, sale, or other conveyance of less 
than a 100 percent interest in the entire tract on which the bid is 
submitted, by a person

[[Page 433]]

or persons on the List of Restricted Joint Bidders, effective on the 
date of submission of the bid, to another person or persons on the same 
List of Restricted Joint Bidders; or
    (2) For the assignment, sale, transfer or other conveyance of less 
than a 100 percent interest in any fractional interest in the entire 
tract (which fractional interest was originally acquired by the person 
making the assignment, sale, transfer or other conveyance, under the 
provisions of the act) by a person or persons on the List of Restricted 
Joint Bidders, effective on the date of submission of the bid, to 
another person or persons on the same List of Restricted Joint Bidders; 
or
    (3) For the assignment, sale, transfer, or other conveyance of any 
interest in a tract by a person or persons not on the List of Restricted 
Joint Bidders, effective on the date of submission of the bid, to 2 or 
more persons on the same List of Restricted Joint Bidders; or
    (4) For any of the types of conveyances described in paragraphs (c) 
(1), (2) or (3) of this section where any party to the conveyance is 
chargeable for the prior production period with an average daily 
production in excess of 1.6 million barrels of crude oil, natural gas 
and liquified petroleum products and has not filed a Statement of 
Production pursuant to Sec. 256.41 of this part for the applicable 6-
month bidding period. Assignments expressly required by law, regulation, 
lease or stipulation to lease shall not disqualify an otherwise 
qualified bid; or
    (d) A bid submitted by or in conjunction with a person who has filed 
a false, fraudulent or otherwise intentionally false or misleading 
detailed Report of Production.

[44 FR 38276, June 29, 1979; 44 FR 55380, Sept. 26, 1979, as amended at 
45 FR 69175, Oct. 17, 1980; 47 FR 25971, June 16, 1982. Redesignated at 
47 FR 47006, Oct. 22, 1982]



Sec. 256.46  Submission of bids.

    (a) A separate sealed bid shall be submitted for each tract unit bid 
upon as described in the notice of lease sale. A bid may not be 
submitted for less than an entire tract.
    (b) Each bidder shall submit with the bid, a certified or cashier's 
check or bank draft on a solvent bank, or cash, or any other form of 
payment approved by the Secretary for one-fifth of the amount of the 
cash bonus, unless otherwise stated in the Notice of Sale.
    (c) If the bidder is an individual a statement of citizenship shall 
accompany the bid.
    (d) If the bidder is an association (including a partnership), the 
bid shall be accompanied by a certified statement indicating the State 
in which it is registered and that it is authorized to hold mineral 
leases on the OCS, or appropriate reference to statements or records 
previously submitted to an MMS OCS office (including material submitted 
in compliance with prior regulations).
    (e) If the bidder is a corporation, the following information shall 
be submitted with the bid:
    (1) A statement certified by the corporate Secretary or Assistant 
Secretary over the corporate seal showing the State in which it was 
incorporated and that it is authorized to hold mineral leases on the 
OCS, or appropriate reference to statements or records previously 
submitted to an MMS OCS office (including material submitted in 
compliance with prior regulations).
    (2) Evidence of authority of persons signing to bind the 
corporation. Such evidence may be in the form of either a certified copy 
of the minutes of the board of directors or of the bylaws indicating 
that the person signing has authority to do so; or a certificate to that 
effect signed by the Secretary or Assistant Secretary of the corporation 
over the corporate seal, or appropriate reference to statements or 
records previously submitted to an MMS OCS office (including material 
submitted in compliance with prior regulations). Bidders are advised to 
keep their filings current.
    (3) The bid shall be executed in conformance with corporate 
requirements.
    (f) Bidders should be aware of the provisions of 18 U.S.C. 1860, 
prohibiting unlawful combination or intimidation of bidders.
    (g) To verify the accuracy of any statement submitted pursuant to 
Sec. 256.41 of this part, the Director may require the person submitting 
such information to:

[[Page 434]]

    (1) Submit no later than 30 days after receipt of the request by the 
Director, a detailed Report of Production which shall list, in barrels, 
the average daily production of crude oil, natural gas and liquefied 
petroleum products chargeable to the reporting person in accordance with 
Sec. 256.43 of this part for the prior production period, and
    (2) Permit the inspection and copying by an official of the 
Department of the Interior of such documents, records of production of 
crude oil, natural gas and liquified petroleum products, analyses and 
other material as are necessary to demonstrate the accuracy of any 
statement or information contained in any Report of Production.
    (h) No bid for a lease may be submitted if the Secretary finds, 
after notice and hearing, that the bidder is not meeting due diligence 
requirements on other OCS leases.

[44 FR 38276, June 29, 1979, as amended at 45 FR 69175, Oct. 17, 1980; 
47 FR 25971, June 16, 1982. Redesignated at 47 FR 47006, Oct. 22, 1982]



Sec. 256.47  Award of leases.

    (a) Sealed bids received in response to the notice of lease sale 
shall be opened at the place, date and hour specified in the notice. The 
opening of bids is for the sole purpose of publicly announcing and 
recording the bids received and no bids shall be accepted or rejected at 
that time.
    (b) The United States reserves the right to reject any and all bids 
received for any tract, regardless of the amount offered.
    (c) In the event the highest bids are tie bids, the tie bidders 
(unless they would be disqualified under Sec. 256.35(b) of this part, or 
disqualified under Sec. 256.44 of this part if their bids had been joint 
bids) may file with the Director, within 15 days after notification, an 
agreement to accept the lease jointly; otherwise all bids shall be 
rejected.
    (d) Pursuant to section 8(c) of the Act, the Attorney General may 
review the results of the lease sale prior to the acceptance of bids and 
issuance of leases.
    (e)(1) The decision of the authorized officer on bids shall be the 
final action of the Department, subject only to reconsideration by the 
Secretary, pursuant to written request, of the rejection of the high 
bid. The delegation of review authority to the Office of Hearings and 
Appeals shall not be applicable to decisions on high bids for leases on 
the Outer Continental Shelf.
    (2) The authorized officer must accept or reject the bid within 90 
days. The authorized officer may extend the time period for acceptance 
or rejection of a bid for 15 working days or longer, if circumstances 
warrant. Any bid not accepted within the prescribed time period, 
including any extension thereof, is deemed rejected.
    (3) Any high bidder whose bid is rejected by the authorized officer 
may, within 15 days of such rejection, file with the Secretary, with a 
copy to the authorized officer, a written request for reconsideration 
accompanied by a statement of reasons. The Secretary shall respond in 
writing either affirming or reversing the decision of the authorized 
officer.
    (f) Written notice of the authorized officer's action shall be 
transmitted promptly to those bidders whose deposits have been held. If 
a bid is accepted, such notice shall transmit three copies of the lease 
to the successful bidder. As provided in Sec. 218.155, the bidder shall, 
not later than the 11th business day after receipt of the lease, execute 
the lease, pay the first-year's rental, and unless deferred, pay the 
balance of the bonus bid. The bidder must also file a bond as required 
in Sec. 256.52 of this title. Deposits and any interest accrued shall be 
refunded on high bids subsequently rejected.
    (g) If the successful bidder fails to execute the lease within the 
prescribed time or otherwise comply with the applicable regulations the 
deposit shall be forfeited and disposed of as other receipts under the 
act.
    (h) If, before the lease is executed on behalf of the United States, 
the land which would be subject to the lease is withdrawn or restricted 
from leasing, all deposits and any interest due shall be refunded.
    (i) If the awarded lease is executed by an agent acting on behalf of 
the bidder, the lease shall be accompanied by evidence that the bidder 
authorized the agent to execute the lease. When three

[[Page 435]]

copies of the lease are executed and returned to the authorized officer, 
the lease shall be executed on behalf of the United States, and one 
fully executed copy shall be transmitted to the successful bidder.
    (j) No lease or permit shall be issued for any area within 15 
statute miles of the boundaries of the Point Reyes Wilderness in 
California unless the State of California allows exploration, 
development or production activities in the adjacent navigable waters of 
the State under section 11(h) of the Act.

[44 FR 38276, June 29, 1979, as amended at 47 FR 25972, June 16, 1982. 
Redesignated at 47 FR 47006, Oct. 22, 1982, and amended at 49 FR 8606, 
Mar. 8, 1984; 49 FR 10056, Mar. 16, 1984; 50 FR 47378, Nov. 18, 1985; 61 
FR 34732, July 3, 1996; 62 FR 27955, May 22, 1997]

    Effective Date Note: At 62 FR 27955, May 22, 1997, Sec. 256.47 was 
amended by revising the fourth sentence in paragraph (f), effective Aug. 
20, 1997. For the convenience of the user, the superseded text is set 
forth as follows:

Sec. 256.47  Award of leases.

                                * * * * *

    (f)* * *The bidder shall also file a bond as required in Sec. 256.58 
of this title.* * *

                                * * * * *



Sec. 256.49  Lease form.

    Oil and gas leases and leases for sulphur shall be issued on forms 
approved by the Director. Other mineral leases shall be issued on such 
forms as may be prescribed by the Secretary.

[47 FR 25972, June 16, 1982. Redesignated at 47 FR 47006, Oct. 22, 1982]



Sec. 256.50  Dating of leases.

    All leases issued under the regulations in this part shall be dated 
and become effective as of the first day of the month following the date 
leases are signed on behalf of the lessor. When prior written request is 
made, a lease may be dated and become effective as of the first day of 
the month within which it is so signed.



               Subpart H--Rentals and Royalties [Reserved]



                           Subpart I--Bonding



Sec. 256.52  Bond requirements for an oil and gas or sulphur lease.

    This section establishes bond requirements for the lessee of an OCS 
oil and gas or sulphur lease.
    (a) Before MMS will issue a new lease or approve the assignment of 
an existing lease to you as lessee, you or another record title owner 
for the lease must:
    (1) Maintain with the Regional Director a $50,000 lease bond that 
guarantees compliance with all the terms and conditions of the lease; or
    (2) Maintain a $300,000 areawide bond that guarantees compliance 
with all the terms and conditions of all your oil and gas and sulphur 
leases in the area where the lease is located; or
    (3) Maintain a lease or areawide bond in the amount required in 
Sec. 256.53(a) or (b) of this part.
    (b) For the purpose of this section, there are four areas:
    (1) The Gulf of Mexico;
    (2) The area offshore the Pacific Coast States of California, 
Oregon, Washington, and Hawaii;
    (3) The area offshore the Coast of Alaska; and
    (4) The area offshore the Atlantic Coast.
    (c) The requirement to maintain a lease bond (or substitute security 
instruments) under paragraph (a)(1) of this section and Sec. 256.53 (a) 
and (b) is satisfied if your operator provides a lease bond in the 
required amount that guarantees compliance with all the terms and 
conditions of the lease. Your operator may not use an areawide bond 
under this paragraph to satisfy your bond obligation.
    (d) If a surety makes payment to the United States under a bond or 
alternate form of security maintained under this section, the surety's 
remaining liability under the bond or alternate form of security is 
reduced by the

[[Page 436]]

amount of that payment. See paragraph (e) of this section for the 
requirement to replace the reduced bond coverage.
    (e) If the value of your surety bond or alternate security is 
reduced because of a default, or for any other reason, you must provide 
additional bond coverage sufficient to meet the security required under 
this subpart within 6 months, or such shorter period of time as the 
Regional Director may direct.
    (f) You may pledge U.S. Department of the Treasury (Treasury) 
securities instead of a bond. The Treasury securities you pledge must be 
negotiable for an amount of cash equal to the value of the bond they 
replace.
    (1) If you pledge Treasury securities under this paragraph (f), you 
must monitor their value. If their market value falls below the level of 
bond coverage required under this subpart, you must pledge additional 
Treasury securities to raise the value of the securities pledged to the 
required amount.
    (2) If you pledge Treasury securities, you must include authority 
for the Regional Director to sell them and use the proceeds when the 
Regional Director determines that you fail to satisfy any lease 
obligation.
    (g) You may pledge alternate types of security instruments instead 
of providing a bond if the Regional Director determines that the 
alternate security protects the interests of the United States to the 
same extent as the required bond.
    (1) If you pledge an alternate type of security under this 
paragraph, you must monitor the security's value. If its market value 
falls below the level of bond coverage required under this subpart, you 
must pledge additional securities to raise the value of the securities 
pledged to the required amount.
    (2) If you pledge an alternate type of security, you must include 
authority for the Regional Director to sell the security and use the 
proceeds when the Regional Director determines that you failed to 
satisfy any lease obligation.
    (h) If you fail to replace a deficient bond or to provide additional 
bond coverage upon demand, the Regional Director may:
    (1) Assess penalties under part 250, subpart N of this chapter;
    (2) Suspend production and other operations on your leases in 
accordance with Sec. 250.10 of this chapter; and
    (3) Initiate action to cancel your lease.

[62 FR 27955, May 22, 1997.]

    Effective Date Note: At 62 FR 27955, May 22, 1997, Sec. 256.58 was 
redesignated as Sec. 256.52 and revised, effective Aug. 20, 1997. For 
the convenience of the user, the superseded text is set forth as 
follows:

Sec. 256.58  Acceptable bonds/alternate security instruments.

    (a) The successful bidder, prior to the issuance of an oil and gas 
or sulphur lease, shall furnish the authorized officer a surety bond in 
the amount of $50,000 conditioned on compliance with all the terms and 
conditions of the lease. A $50,000 lease surety bond need not be 
submitted and maintained if the bidder furnishes and maintains an 
areawide bond in the sum of $300,000 issued by a qualified surety and 
conditioned on compliance with all the terms and conditions of oil and 
gas and sulphur leases held by the bidder on the OCS for the area in 
which the lease to be issued in situated, furnishes and maintains an 
areawide bond under Sec. 256.61 (a)(2) or (b)(2) of this part, or 
submits a substitute security instrument in accordance with paragraphs 
(f) and (g) of this section.
    (b) For the purposes of this section, there are four areas:
    (1) The Gulf of Mexico;
    (2) The area offshore the Pacific Coast States of California, 
Oregon, Washington, and Hawaii;
    (3) The area offshore the Coast of Alaska; and
    (4) The area offshore the Atlantic Coast.
    (c)(1) A lessee shall provide a separate areawide surety bond 
furnished and maintained pursuant to paragraph (a) of this section, or 
Sec. 256.61 of this part, or a separate areawide alternate security 
instrument furnished pursuant to paragraphs (f) or (g) of this section, 
to secure the performance of lessee's obligation to comply with all the 
terms and conditions of leases in each of the areas identified in 
paragraph (b) of this section in which leases are held.
    (2) An operator's bond in the same amount as the lease bond required 
under paragraph (a) of this section, or Sec. 256.61 of this part, or 
alternate security instruments of the same amount as provided for in 
paragraphs (f) and (g) of this section, may be substituted at any time 
for the equivalent lessee's bond. The substitution of an operator's bond 
or alternate security instrument for a lessee's bond shall not relieve 
the lessee of its obligation to comply with the terms and conditions of 
the lease.

[[Page 437]]

    (d) If, as the result of a default, the surety on a Mineral Lease 
Bond makes payment to the United States of any indebtedness under a 
lease secured by the bond, the face amount of such bond and the surety's 
liability shall be reduced by the amount of such payment.
    (e) If any bond has been reduced by any amount as the result of 
payment for default, the lessee must post a new bond in at least the 
amount of the original face value of the reduced bond within 6 months or 
such shorter period of time as the authorized officer may direct after a 
default. If the reduced bond is an individual lease bond, the lessee or 
operator may replace it with an areawide bond as provided in paragraph 
(a) of this section or Sec. 256.61 (a)(2) or (b)(2) of this part. 
Failure to post such a new bond shall, at the discretion of the 
authorized officer, be the basis of cancellation of the lease(s) covered 
by the defaulted bond.
    (f) U.S. Department of the Treasury (U.S. Treasury) securities (U.S. 
Bonds or Notes) may be submitted in lieu of a bond, provided the U.S. 
Treasury instrument or legal tender submitted is negotiable at the time 
of submission for an amount of cash equal to the value of the required 
bond.
    (g) The authorized officer may approve the submission of alternate 
types of securities or collateral in lieu of the surety bonds required 
by this section if:
    (1) The authorized officer determines that the interests of the 
Government are protected to the same extent that these interests would 
be protected by a surety bond, and
    (2) The substitute security instrument is not limited in its term 
and is not revocable.
    (h) With the approval of the Secretary, the Director may provide at 
the time of the notice of lease sale that (1) the successful bidder for 
a lease where payment of any part of the cash bonus has been deferred 
pursuant to 43 U.S.C. 1337(a)(2), as implemented by 30 CFR 256.32(d), 
shall furnish the authorized officer a corporate surety bond in the 
amount of the cash bonus deferred conditioned on payment of the cash 
bonus deferred according to the notice of lease sale; and (2) the high 
bidder for a lease where the decision to accept the high bid has been 
deferred, pursuant to 43 U.S.C. 1337(a)(1), as implemented by 30 CFR 
256.47(e)(2), shall furnish the authorized officer a corporate surety 
bond in the amount of the bid not already remitted, conditioned on 
payment of the yet to be remitted amount after the bidder has been 
notified that his high bid has been accepted, within the time specified 
in the notice of lease sale.



Sec. 256.53  Additional bonds.

    (a) This paragraph explains what bonds the lessee must provide 
before lease exploration activities commence.
    (1)(i) You must furnish the Regional Director a $200,000 bond that 
guarantees compliance with all the terms and conditions of the lease by 
the earliest of:
    (A) The date you submit a proposed Exploration Plan (EP) for 
approval;
    (B) The date you submit a request for approval of the assignment of 
a lease on which an EP has been approved; or
    (C) December 8, 1997, for any lease for which an EP has been 
approved.
    (ii) The Regional Director may authorize you to submit the $200,000 
lease exploration bond after you submit an EP but before he/she approves 
drilling activities under the EP.
    (iii) You may satisfy the bond requirement of this paragraph (a) by 
providing a new bond or by increasing the amount of your existing bond.
    (2) A $200,000 lease exploration bond pursuant to paragraph (a)(1) 
of this section need not be submitted and maintained if the lessee 
either:
    (i) Furnishes and maintains an areawide bond in the sum of $1 
million issued by a qualified surety and conditioned on compliance with 
all the terms and conditions of oil and gas and sulphur leases held by 
the lease on the OCS for the area in which the lessee is situated; or
    (ii) Furnishes and maintains a bond pursuant to paragraph (b)(2) of 
this section.
    (b) This paragraph explains what bonds you (the lessee) must provide 
before lease development and production activities commence.
    (1)(i) You must furnish the Regional Director a $500,000 bond that 
guarantees compliance with all the terms and conditions of the lease by 
the earliest of:
    (A) The date you submit a proposed Development and Production Plan 
(DPP) or Development Operations Coordination Document (DOCD) for 
approval;
    (B) The date you submit a request for approval of the assignment of 
a lease on which a DPP or DOCD has been approved; or
    (C) December 8, 1997, for any lease for which a DPP or DOCD has been 
approved.
    (ii) The Regional Director may authorize you to submit the $500,000 
lease

[[Page 438]]

development bond after you submit a DPP or DOCD, but before he/she 
approves the installation of a platform or the commencement of drilling 
activities under the DPP or DOCD.
    (iii) You may satisfy the bond requirement of this paragraph by 
providing a new bond or by increasing the amount of your existing bond.
    (2) The lessee need not submit and maintain a $500,000 lease 
development bond pursuant to paragraph (b)(1) of this section if the 
lessee furnishes and maintains an areawide bond in the sum of $3 million 
issued by a qualified surety and conditioned on compliance with all the 
terms and conditions of oil and gas and sulphur leases held by the 
lessee on the OCS for the area in which the lease is situated.
    (c) When a lessee can demonstrate to the satisfaction of the 
authorized officer that wells and platforms can be abandoned and removed 
and the drilling and platform sites cleared of obstructions for less 
than the amount of lease bond coverage required under paragraph (b)(1) 
of this section, the authorized officer may accept a lease surety bond 
in an amount less than the prescribed amount but not less than the 
amount of the cost for well abandonment, platform removal, and site 
clearance.
    (d) The Regional Director may determine that additional security 
(i.e., security above the amounts prescribed in Secs. 256.52(a) and 
256.53 (a) and (b) of this part) is necessary to ensure compliance with 
the obligations under your lease and the regulations in this chapter.
    (1) The Regional Director's determination will be based on his/her 
evaluation of your ability to carry out present and future financial 
obligations demonstrated by:
    (i) Financial capacity substantially in excess of existing and 
anticipated lease and other obligations, as evidenced by audited 
financial statements (including auditor's certificate, balance sheet, 
and profit and loss sheet);
    (ii) Projected financial strength significantly in excess of 
existing and future lease obligations based on the estimated value of 
your existing OCS lease production and proven reserves of future 
production;
    (iii) Business stability based on 5 years of continuous operation 
and production of oil and gas or sulphur in the OCS or in the onshore 
oil and gas industry;
    (iv) Reliability in meeting obligations based on:
    (A) Credit rating(s); or
    (B) Trade references, including names and addresses of other 
lessees, drilling contractors, and suppliers with whom you have dealt; 
and
    (v) Record of compliance with laws, regulations, and lease terms.
    (2) You may satisfy the Regional Director's demand for additional 
security by increasing the amount of your existing bond or by providing 
a supplemental bond or bonds.
    (e) The Regional Director will determine the amount of supplemental 
bond required to guarantee compliance. The Regional Director will 
consider potential underpayment of royalty and cumulative obligations to 
abandon wells, remove platforms and facilities, and clear the seafloor 
of obstructions in the Regional Director's case-specific analysis.
    (f) If your cumulative potential obligations and liabilities either 
increase or decrease, the Regional Director may adjust the amount of 
supplemental bond required.
    (1) If the Regional Director proposes an adjustment, the Regional 
Director will:
    (i) Notify you and the surety of any proposed adjustment to the 
amount of bond required; and
    (ii) Give you an opportunity to submit written or oral comment on 
the adjustment.
    (2) If you request a reduction of the amount of supplemental bond 
required, you must submit evidence to the Regional Director 
demonstrating that the projected amount of royalties due the Government 
and the estimated costs of lease abandonment and cleanup are less than 
the required bond amount. If the Regional Director finds that the 
evidence you submit is convincing, he/she may reduce the amount of 
supplemental bond required.

[58 FR 45262, Aug. 27, 1993. Redesignated and amended at 62 FR 27956, 
May 22, 1997]

    Effective Date Note: At 62 FR 27956, May 22, 1997, Sec. 256.61 was 
redesignated as Sec. 256.53 of

[[Page 439]]

subpart I; introductory texts were added to paragraphs (a) and (b); 
paragraphs (a)(1), (b)(1), and (d) were revised; and paragraphs (e) and 
(f) were added, effective Aug. 20, 1997. For the convenience of the 
user, the superseded text is set forth as follows:

Sec. 256.61  Additional bonds.
    (a)(1) A surety bond in the amount of $200,000 issued by a qualified 
surety, and conditioned on compliance with all the terms and conditions 
of the lease, shall be furnished to the authorized officer with a 
proposed Exploration Plan (EP) or a proposed assignment of a lease with 
an approved EP submitted for approval on or after November 26, 1993. 
Approval of the EP or assignment shall be conditioned upon receipt of a 
lease surety bond in the amount of $200,000, unless the authorized 
officer, for good cause, authorizes the submission of the $200,000 lease 
exploration bond after the submission of the EP but prior to approval of 
drilling activities under the approved EP. This bond coverage may be 
provided by increasing the bond coverage provided pursuant to 
Sec. 256.58(a) of this part.

                                * * * * *

    (b)(1) A surety bond in the amount of $500,000 issued by a qualified 
surety and conditioned on compliance with all the terms and conditions 
of the lease shall be furnished to the authorized officer with a 
proposed Development and Production Plan (DPP), Development Operations 
Coordination Document (DOCD), or a proposed assignment of a lease with 
an approved DPP or DOCD submitted for approval on or after November 26, 
1993. Approval of a DPP, DOCD, or assignment of a lease with an approved 
DPP or DOCD shall be conditioned on receipt of a lease surety bond in 
the amount of $500,000, unless the authorized officer, for good cause, 
authorizes the submission of the $500,000 lease development bond after 
the submission of the DPP or DOCD but prior to the approval of platform 
installation or drilling activities under the approved DPP or DOCD. The 
lessee may provide this additional bond by submission of a new bond or 
by increasing the lease bond coverage of $200,000 provided under 
paragraph (a) of this section.

                                * * * * *

    (d) The authorized officer may require additional security (i.e., 
security over and above the amounts prescribed in Secs. 256.58(a) and 
256.61 (a), (b), and (c) of this part) in the form of a supplemental 
bond or bonds or increased amount of coverage of an existing surety bond 
if the authorized officer deems such additional security necessary to 
cover royalty due the Government or costs and liabilities of the lessee 
for regulatory compliance, e.g., abandonment of wells, removal of 
platforms, and clearance of equipment and facilities from the lease once 
production ceases and the lease expires. The authorized officer shall 
base the decision on an evaluation of the ability of the lessee to carry 
out its present and future financial obligations, as demonstrated by 
factors such as:
    (1) Financial capacity of the lessee substantially in excess of 
existing and anticipated lease and other obligations (including but not 
limited to well abandonment, platform removal, and royalty due to the 
Government) as evidenced by audited financial statements including 
auditor's certificate, balance sheet, and profit and loss sheet;
    (2) Projected financial strength as evidenced by existing OCS 
production and proven reserves of future production valued significantly 
in excess of existing and future obligations;
    (3) Business stability as evidenced by years of successful operation 
in the OCS or in the oil and gas industry;
    (4) Reliability in meeting obligations as evidenced by credit 
ratings and trade references (for which purpose a lessee shall upon 
request furnish a list of the names and addresses of lessees, drilling 
contractors, and suppliers with whom it has dealt); and
    (5) Record of compliance with laws, regulations, and lease terms.



Sec. 256.54  General requirements for bonds.

    (a) Any bond or other security that you, as lessee or operator, 
provide under this part must:
    (1) Be payable upon demand to the Regional Director;
    (2) Guarantee compliance with all of your obligations under the 
lease and regulations in this chapter; and
    (3) Guarantee compliance with the obligations of all lessees, 
operating rights owners and operators on the lease.
    (b) All bonds and pledges you furnish under this part must be on a 
form or in a form approved by the Associate Director for Offshore 
Minerals Management. Surety bonds must be issued by a surety that the 
Treasury certifies as an acceptable surety on Federal bonds and that is 
listed in the current Treasury Circular No. 570. You may obtain a copy 
of the current Treasury Circular No. 570 from the Surety Bond Branch, 
Financial Management Service, Department of the Treasury, East-West 
Highway, Hyattsville, MD 20782.

[[Page 440]]

    (c) You and a qualified surety must execute your bond. When either 
party is a corporation, an authorized official for the party must sign 
the bond and attest to it by an imprint of the corporate seal.
    (d) Bonds must be noncancellable, except as provided in Sec. 256.58 
of this part. Bonds must continue in full force and effect even though 
an event occurs that could diminish, terminate, or cancel a surety 
obligation under State surety law.
    (e) Lease bonds must be:
    (1) A surety bond;
    (2) Treasury securities as provided in Sec. 256.52(f);
    (3) Another form of security approved by the Regional Director; or
    (4) A combination of these security methods.
    (f) You may submit a bond to the Regional Director executed on a 
form approved under paragraph (b) of this section that you have 
reproduced or generated by use of a computer. If you do this, and if the 
document omits terms or conditions contained on the form approved by the 
Associate Director for Offshore Minerals Management the bond you submit 
will be deemed to contain the omitted terms and conditions.

[62 FR 27956, May 22, 1997]
    Effective Date Note: At 62 FR 27956, May 22, 1997, Sec. 256.59 was 
redesignated as Sec. 256.54 and revised, effective Aug. 20, 1997. For 
the convenience of the user, the superseded text is set forth as 
follows:

Sec. 256.59  Bond form.
    All bonds furnished by a bidder, lessee, or operator shall be on a 
form, or in a form, approved by the Director. Bonds required by this 
part and submitted after November 26, 1993 shall be issued by a 
qualified surety company certified by the U.S. Treasury as an acceptable 
surety on Federal bonds and listed in the current U.S. Treasury Circular 
No. 570 which is available from Surety Bond Branch, Financial Management 
Service, Department of the Treasury, 401 14th Street, SW., Washington, 
DC 20227.



Sec. 256.55  Lapse of bond.

    (a) If your surety becomes bankrupt, insolvent, or has its charter 
or license suspended or revoked, any bond coverage from that surety 
terminates immediately. In that event, you must promptly provide a new 
bond in the amount required under Secs. 256.52 and 256.53 of this part 
to the Regional Director and advise the Regional Director of the lapse 
in your previous bond.
    (b) You must notify the Regional Director of any action filed 
alleging that you, your surety, or guarantor are insolvent or bankrupt. 
You must notify the Regional Director within 72 hours of learning of 
such an action. All bonds must require the surety to provide this 
information to you and directly to MMS.

[62 FR 27957, May 22, 1997]

    Effective Date Note: At 62 FR 27957, May 22, 1997, Sec. 256.55 was 
added, effective Aug. 20, 1997.



Sec. 256.56  Lease-specific abandonment accounts.

    (a) The Regional Director may authorize you to establish a lease-
specific abandonment account in a federally insured institution in lieu 
of the bond required under Sec. 256.53(d). The account must provide 
that, except as provided in paragraph (a)(3) of this section, funds may 
not be withdrawn without the written approval of the Regional Director.
    (1) Funds in a lease-specific abandonment account must be payable 
upon demand to MMS and pledged to meet the lessee's obligations under 
Sec. 250.110 of this chapter.
    (2) You must fully fund the lease-specific abandonment account to 
cover all the costs of lease abandonment and site clearance as estimated 
by MMS within the timeframe the Regional Director prescribes.
    (3) You must provide binding instructions under which the 
institution managing the account is to purchase Treasury securities 
pledged to MMS under paragraph (d) of this section.
    (b) Any interest paid on funds in a lease-specific abandonment 
account will be treated as other funds in the account unless the 
Regional Director authorizes in writing the payment of interest to the 
party who deposits the funds.
    (c) The Regional Director may allow you to pledge Treasury 
securities that are made payable upon demand to the Regional Director to 
satisfy your obligation to make payments into a lease-specific 
abandonment account.

[[Page 441]]

    (d) Before the amount of funds in a lease-specific abandonment 
account equals the maximum insurable amount as determined by the Federal 
Deposit Insurance Corporation or the Federal Savings and Loan Insurance 
Corporation, the institution managing the account must use the funds in 
the account to purchase Treasury securities pledged to MMS under 
paragraph (c) of this section. The institution managing the lease 
specific-abandonment account will join with the Regional Director to 
establish a Federal Reserve Circular 154 account to hold these Treasury 
securities, unless the Regional Director authorizes the managing 
institution to retain the pledged Treasury securities in a separate 
trust account. You may obtain a copy of the current Treasury Circular 
No. 154 from the Surety Bond Branch, Financial Management Service, 
Department of the Treasury, East-West Highway, Hyattsville, MD 20782.
    (e) The Regional Director may require you to create an overriding 
royalty or production payment obligation for the benefit of a lease-
specific account pledged for the abandonment and clearance of a lease. 
The required obligation may be associated with oil and gas or sulphur 
production from a lease other than the lease bonded through the lease-
specific abandonment account.

[62 FR 27957, May 22, 1997]

    Effective Date Note: At 62 FR 27957, May 22, 1997, Sec. 256.56 was 
added, effective Aug. 20, 1997.



Sec. 256.57  Using a third-party guarantee instead of a bond.

    (a) When the Regional Director may accept a third-party guarantee. 
The Regional Director may accept a third-party guarantee instead of an 
additional bond under Sec. 256.53(d) if:
    (1) The guarantee meets the criteria in paragraph (c) of this 
section;
    (2) The guarantee includes the terms specified in paragraph (d) of 
this section;
    (3) The guarantor's total outstanding and proposed guarantees do not 
exceed 25 percent of its unencumbered net worth in the United States; 
and
    (4) The guarantor submits an indemnity agreement meeting the 
criteria in paragraph (e) of this section.
    (b) What to do if your guarantor becomes unqualified. If, during the 
life of your third-party guarantee, your guarantor no longer meets the 
criteria of paragraphs (a)(3) and (c)(3) of this section, you must:
    (1) Notify the Regional Director immediately; and
    (2) Cease production until you comply with the bond coverage 
requirements of this subpart.
    (c) Criteria for acceptable guarantees. If you propose to furnish a 
third party's guarantee, that guarantee must ensure compliance with all 
lessees' lease obligations, the obligations of all operating rights 
owners, and the obligations of all operators on the lease. The Regional 
Director will base acceptance of your third-party guarantee on the 
following criteria:
    (1) The period of time that your third-party guarantor (guarantor) 
has been in continuous operation as a business entity where:
    (i) Continuous operation is the time that your guarantor conducts 
business immediately before you post the guarantee; and
    (ii) Continuous operation excludes periods of interruption in 
operations that are beyond your guarantor's control and that do not 
affect your guarantor's likelihood of remaining in business during 
exploration, development, production, abandonment, and clearance 
operations on your lease.
    (2) Financial information available in the public record or 
submitted by your guarantor, on your guarantor's own initiative, in 
sufficient detail to show to the Regional Director's satisfaction that 
your guarantor is qualified based on:
    (i) Your guarantor's current rating for its most recent bond 
issuance by either Moody's Investor Service or Standard and Poor's 
Corporation;
    (ii) Your guarantor's net worth, taking into account liabilities 
under its guarantee of compliance with all the terms and conditions of 
your lease, the regulations in this chapter, and your guarantor's other 
guarantees;
    (iii) Your guarantor's ratio of current assets to current 
liabilities, taking

[[Page 442]]

into account liabilities under its guarantee of compliance with all the 
terms and conditions of your lease and the regulations in this chapter 
and your guarantor's other guarantees; and
    (iv) Your guarantor's unencumbered fixed assets in the United 
States.
    (3) When the information required by paragraph (c) of this section 
is not publicly available, your guarantor may submit the information in 
the following table. Your guarantor must update the information annually 
within 90 days of the end of the fiscal year or by the date prescribed 
by the Regional Director.

------------------------------------------------------------------------
       The guarantor should submit--                   that--           
------------------------------------------------------------------------
(i) Financial statements for the most       Include a report by an      
 recently completed fiscal year.             independent certified      
                                             public accountant          
                                             containing the accountant's
                                             audit opinion or review    
                                             opinion of the statements. 
                                             The report must be prepared
                                             in conformance with        
                                             generally accepted         
                                             accounting principles and  
                                             contain no adverse opinion.
(ii) Financial statements for completed     Your guarantor's financial  
 quarters in the current fiscal year.        officer certifies to be    
                                             correct.                   
(iii) Additional information as requested   Your guarantor's financial  
 by the Regional Director.                   officer certifies to be    
                                             correct.                   
------------------------------------------------------------------------

    (d) Provisions required in all third-party guarantees. Your third-
party guarantee must contain each of the following provisions.
    (1) If you, your operator, or an operating rights owner fails to 
comply with any lease term or regulation, your guarantor must either:
    (i) Take corrective action; or
    (ii) Be liable under the indemnity agreement to provide, within 7 
calendar days, sufficient funds for the Regional Director to complete 
corrective action.
    (2) If your guarantor complies with paragraph (d)(1) of this 
section, this compliance will not reduce its liability.
    (3) If your guarantor wishes to terminate the period of liability 
under its guarantee, it must:
    (i) Notify you and the Regional Director at least 90 days before the 
proposed termination date;
    (ii) Obtain the Regional Director's approval for the termination of 
the period of liability for all or a specified portion of your 
guarantor's guarantee; and
    (iii) Remain liable for all work and workmanship performed during 
the period that your guarantor's guarantee is in effect.
    (4) You must provide a suitable replacement security instrument 
before the termination of the period of liability under your third-party 
guarantee.
    (e) Required criteria for indemnity agreements. If the Regional 
Director approves your third-party guarantee, the guarantor must submit 
an indemnity agreement.
    (1) The indemnity agreement must be executed by your guarantor and 
all persons and parties bound by the agreement.
    (2) The indemnity agreement must bind each person and party 
executing the agreement jointly and severally.
    (3) When a person or party bound by the indemnity agreement is a 
corporate entity, two corporate officers who are authorized to bind the 
corporation must sign the indemnity agreement.
    (4) Your guarantor and the other corporate entities bound by the 
indemnity agreement must provide the Regional Director copies of:
    (i) The authorization of the signatory corporate officials to bind 
their respective corporations;
    (ii) An affidavit certifying that the agreement is valid under all 
applicable laws; and
    (iii) Each corporation's corporate authorization to execute the 
indemnity agreement.
    (5) If your third-party guarantor or another party bound by the 
indemnity agreement is a partnership, joint venture, or syndicate, the 
indemnity agreement must:
    (i) Bind each partner or party who has a beneficial interest in your 
guarantor; and
    (ii) Provide that, upon demand by the Regional Director under your 
third-party guarantee, each partner is jointly and severally liable for 
compliance with all terms and conditions of your lease.
    (6) When forfeiture is called for under Sec. 256.59 of this part, 
the indemnity agreement must provide that your guarantor will either:

[[Page 443]]

    (i) Bring your lease into compliance; or
    (ii) Provide, within 7 calendar days, sufficient funds to permit the 
Regional Director to complete corrective action.
    (7) The indemnity agreement must contain a confession of judgment. 
It must provide that, if the Regional Director determines that you, your 
operator, or an operating rights owner is in default of the lease, the 
guarantor:
    (i) Will not challenge the determination; and
    (ii) Will remedy the default.
    (8) Each indemnity agreement is deemed to contain all terms and 
conditions contained in this paragraph (e), even if the guarantor has 
omitted them.

[62 FR 27957, May 22, 1997]

    Effective Date Note: At 62 FR 27957, May 22, 1997, Sec. 256.57 was 
added, effective Aug. 20, 1997.



Sec. 256.58  Termination of the period of liability and cancellation of a bond.

    This section defines the terms and conditions under which the 
Regional Director may terminate the period of liability of a bond or 
cancel a bond.
    (a) When the surety under your bond requests termination of the 
period of liability under its bond, the Regional Director will terminate 
the period of liability under your bond and demand that you provide a 
replacement bond of equivalent amount.
    (1) Termination of the period of liability under a bond does not 
release the surety of that bond.
    (2) Your surety is responsible for all obligations and liabilities 
that accrue before the effective date of the Regional Director's 
termination of the period of liability under its bond.
    (b) The Regional Director's cancellation or release of a bond may 
include lease obligations that accrue before the effective date of the 
cancellation only when:
    (1) The Regional Director determines that there are no outstanding 
obligations; or
    (2) You furnish a replacement bond:
    (i) In which your new surety agrees to assume all outstanding 
liabilities under the bond that is to be canceled; and
    (ii) That is in an amount equal to or greater than the amount of the 
bond that is to be canceled.
    (c) The Regional Director will issue a written instrument to cancel 
or release your bond. This instrument will subject the bond to automatic 
reinstatement, as if no cancellation or release had occurred, if:
    (1) A person makes a payment under the lease and the payment is 
rescinded or must be repaid by the recipient because the person making 
the payment is insolvent, bankrupt, subject to reorganization, or placed 
in receivership; or
    (2) The responsible party represents to MMS that it has discharged 
its obligations under the lease and the representation is materially 
false when the bond is canceled, or released.

[62 FR 27958, May 22, 1997]

    Effective Date Note: At 62 FR 27958, May 22, 1997, Sec. 256.58 was 
added, effective Aug. 20, 1997.



Sec. 256.59  Forfeiture of bonds and/or other securities.

    This section explains how a bond or other security may be forfeited.
    (a) The Regional Director will call for forfeiture of all or part of 
the bond, other form of security, or guarantee you provide under this 
part if:
    (1) You (the party who provided the bond) refuse, or the Regional 
Director determines that you are unable, to comply with any term or 
condition of your lease; or
    (2) You default under one of the conditions under which the Regional 
Director accepts your bond, third-party guarantee, and/or other form of 
security.
    (b) The Regional Director may pursue forfeiture of your bond without 
first making demands for performance against any lessee, operating 
rights owner, or other person authorized to perform lease obligations.
    (c) The Regional Director will:
    (1) Notify you, the surety on your bond or other form of security, 
and any third-party guarantor, of his/her determination to call for 
forfeiture of the bond, security, or guarantee under this section.
    (i) This notice will be in writing and will provide the reasons for 
the forfeiture and the amount to be forfeited.

[[Page 444]]

    (ii) The Regional Director must base the amount he/she determines is 
forfeited upon his/her estimate of the total cost of corrective action 
to bring your lease into compliance.
    (2) Advise you, your third-party guarantor, and any surety, that 
you, your guarantor, and any surety may avoid forfeiture if, within 5 
working days:
    (i) You agree to, and demonstrate that you will, bring your lease 
into compliance within the timeframe that the Regional Director 
prescribes;
    (ii) Your third-party guarantor agrees to, and demonstrates that it 
will, complete the corrective action to bring your lease into compliance 
within the timeframe that the Regional Director prescribes; or
    (iii) Your surety agrees to, and demonstrates that it will, bring 
your lease into compliance within the timeframe that the Regional 
Director prescribes, even if the cost of compliance exceeds the face 
amount of the bond or other surety instrument.
    (d) If the Regional Director finds you are in default, he/she may 
cause the forfeiture of any bonds and other security deposited as your 
guarantee of compliance with the terms and conditions of your lease and 
the regulations in this chapter.
    (e) If the Regional Director determines that your bond and/or other 
security is forfeited, the Regional Director will:
    (1) Collect the forfeited amount; and
    (2) Use the funds collected to bring your leases into compliance and 
to correct any default.
    (f) If the amount the Regional Director collects under your bond and 
other security is insufficient to pay the full cost of corrective 
actions he/she may:
    (1) Take or direct action to obtain full compliance with your lease 
and the regulations in this chapter; and
    (2) Recover from you, any co-lessee, operating rights owner, and/or 
any third-party guarantor responsible under this subpart all costs in 
excess of the amount he/she collects under your forfeited bond and other 
security.
    (g) The amount that the Regional Director collects under your 
forfeited bond and other security may exceed the costs of taking the 
corrective actions required to obtain full compliance with the terms and 
conditions of your lease and the regulations in this chapter. In this 
case, the Regional Director will return the excess funds to the party 
from whom they were collected.

[62 FR 27958, May 22, 1997]

    Effective Date Note: At 62 FR 27958, May 22, 1997, Sec. 256.59 was 
added, effective Aug. 20, 1997.



            Subpart J--Assignments, Transfers, and Extensions



Sec. 256.62  Assignment of lease or interest in lease.

    This section explains how to assign record title and other interests 
in OCS oil and gas or sulphur leases.
    (a) MMS may approve the assignment to you of the ownership of the 
record title to a lease or any undivided interest in a lease, or an 
officially designated subdivision of a lease, only if:
    (1) You qualify to hold a lease under Sec. 256.35(b);
    (2) You provide the bond coverage required under subpart I of this 
part; and
    (3) The Regional Director approves the assignment.
    (b) An assignment shall be void if it is made pursuant to any 
prelease agreement described in Sec. 256.44(c) of this part that would 
cause a bid to be disqualified.
    (c) Any approved assignment shall be deemed to be effective on the 
first day of the lease month following its filing in the appropriate 
office of the MMS, unless at the request of the parties, an earlier date 
is specified in the approval.
    (d) You, as assignor, are liable for all obligations that accrue 
under your lease before the date that the Regional Director approves 
your request for assignment of the record title in the lease. The 
Regional Director's approval of the assignment does not relieve you of 
accrued lease obligations that your assignee, or a subsequent assignee, 
fails to perform.
    (e) Your assignee and each subsequent assignee are liable for all 
obligations that accrue under the lease after the date that the Regional 
Director approves the governing assignment. They must:

[[Page 445]]

    (1) Comply with all the terms and conditions of the lease and all 
regulations issued under the Act; and
    (2) Remedy all existing environmental problems on the tract, 
properly abandon all wells, and reclaim the lease site in accordance 
with part 250, subpart G.
    (f) If your assignee, or a subsequent assignee, fails to perform any 
obligation under the lease or the regulations in this chapter, the 
Regional Director may require you to bring the lease into compliance to 
the extent that the obligation accrued before the Regional Director 
approved the assignment of your interest in the lease.

[44 FR 38276, June 29, 1979. Redesignated at 47 FR 47006, Oct. 22, 1982, 
and amended at 58 FR 45262, Aug. 27, 1993; 62 FR 27959, May 22, 1997]

    Effective Date Note: At 62 FR 27959, May 22, 1997, Sec. 256.62 was 
amended by revising the section heading, adding introductory text, 
revising paragraphs (a), (d), and (e), and adding paragraph (f), 
effective Aug. 20, 1997. For the convenience of the user, the superseded 
text is set forth as follows:

Sec. 256.62  Assignment of leases or interests therein.
    (a) Subject to the approval of the authorized officer, leases, or 
any undivided interest therein, may be assigned in whole, or as to any 
officially designated subdivision, to anyone qualified under 
Sec. 256.35(b) of this part to hold a lease.

                                * * * * *

    (d) The assignor shall be liable for all obligations under the lease 
accruing prior to the approval of the assignment.
    (e) The assignee shall be liable for all obligations under the lease 
subsequent to the effective date of an assignment, and shall comply with 
all regulations issued under the act including the requirements to 
furnish any surety bonds as specified in OCS leases and Secs. 256.58 and 
256.61 of this part.



Sec. 256.64  How to file transfers.

    This section explains how to file instruments with MMS that create 
and/or transfer interests in OCS oil and gas or sulphur leases.
    (a) You must submit to the Regional Director for approval all 
instruments that create or transfer ownership of a lease interest.
    (1) You must submit two copies of the instruments that create or 
transfer an interest. Each instrument that creates or transfers an 
interest must describe by officially designated subdivision the interest 
you propose to create or transfer.
    (2) You must submit your proposal to create or transfer an interest, 
or create or transfer separate operating rights, subleases, and record 
title interests within 90 days of the last date that a party executes 
the transfer agreement.
    (3) The transferee must meet the citizenship and other qualification 
criteria specified in Sec. 256.35 of this part. When you submit an 
instrument to create or transfer an interest as an association, you must 
include a statement signed by the transferee about the transferee's 
citizenship and qualifications to own a lease.
    (4) Your instrument to create or transfer an interest must contain 
all of the terms and conditions to which you and the other parties 
agree.
    (5) You do not gain a release of any nonmonetary obligation under 
your lease or the regulations in this chapter by creating a sublease or 
transferring operating rights.
    (6) You do not gain a release from any accrued obligation under your 
lease or the regulations in this chapter by assigning your record title 
interest in the lease.
    (7) You may create or transfer carried working interests, overriding 
royalty interests, or payments out of production without obtaining the 
Regional Director's approval. However, you must file instruments 
creating or transferring carried working interests, overriding royalty 
interests, or payments out of production with the Regional Director for 
record purposes.
    (8) An application for approval of any instrument required to be 
filed shall not be accepted unless accompanied by a nonrefundable fee of 
$25. Any document not required to be filed by these regulations but 
submitted for record purposes shall be accompanied by a nonrefundable 
fee of $25 per lease affected. Such documents may be rejected at the 
discretion of the authorized officer.
    (b) An attorney in fact, in behalf of the holder of a lease, 
operating rights or sublease, shall furnish evidence of authority to 
execute the assignment or

[[Page 446]]

application for approval and the statement required by Sec. 256.46 of 
this part.
    (c) When you request approval for an assignment that assigns all 
your record title interest in a lease or that creates a segregated 
lease, your assignee must furnish a bond in the amount prescribed in 
Secs. 256.52 and 256.53 of this part.
    (d) When you request approval for an assignment that assigns less 
than all the record title of a lease and that does not create a separate 
lease, the assignee may, with the surety's consent, become a joint 
principal on the surety instrument that guarantees compliance with all 
the terms and conditions of the lease.
    (e) An heir or devisee of a deceased holder of a lease, or any 
interest therein, shall be recognized as the lawful successor to such 
lease or interest, if evidence of status as an heir or devisee is 
furnished in the form of:
    (1) A certified copy of an appropriate order or decree of the court 
having jurisdiction of the distribution of the estate or,
    (2) If no court action is necessary, the statements of two 
disinterested parties having knowledge of the facts or a certified copy 
of the will.
    (f) In addition to the requirements of paragraph (d) of this 
section, the heirs or devisees shall file statements that they are the 
persons named as successors to the estate with evidence of their 
qualifications as provided in Sec. 256.46 of this part.
    (g) In the event an heir or devisee is unable to qualify to hold the 
lease or interest, the heir or devisee shall be recognized as the lawful 
successor of the deceased and be entitled to hold the lease for a period 
of not to exceed 2 years from the date of death of the predecessor in 
interest.
    (h) Your heirs, executors, administrators, successors, and assigns 
are bound to comply with each obligation under any lease and under the 
regulations in this chapter.
    (1) You are jointly and severally liable for the performance of each 
nonmonetary obligation under the lease and under the regulations in this 
chapter with each prior lessee and with each operating rights owner 
holding an interest at the time the obligation accrued, unless this 
chapter provides otherwise.
    (2) Sublessees and operating rights owners are jointly and severally 
liable for the performance of each nonmonetary obligation under the 
lease and under the regulations in this chapter to the extent that:
    (i) The obligation relates to the area embraced by the sublease;
    (ii) Those owners held their respective interest at the time the 
obligation accrued; and
    (iii) This chapter does not provide otherwise.
    (i) Where the proposed assignment or transfer is by a person who, at 
the time of acquisition of an interest in the lease, was on the List of 
Restricted Joint Bidders, and that assignment or transfer is of less 
than the entire interest of the assignor or transferor, to a person or 
persons on the same List of Restricted Joint Bidders, the assignor or 
transferor shall file a copy, prior to approval of the assignment, of 
all agreements applicable to the acquisition of that lease or a 
fractional interest.

[44 FR 38276, June 29, 1979. Redesignated at 47 FR 47006, Oct. 22, 1982; 
62 FR 27959, May 22, 1997]

    Effective Date Note: At 62 FR 27959, May 22, 1997, Sec. 256.64 was 
amended by revising the section heading, adding introductory text and 
paragraph (a) introductory text, redesignating paragraph (a)(2) as 
(a)(8), adding new paragraphs (a)(2) through (a)(7), redesignating 
paragraphs (d) through (h) as (e) through (i), revising paragraphs (c) 
and redesignated paragraph (h), and adding a new paragraph (d), 
effective Aug. 20, 1997. For the convenience of the user, the superseded 
text is set forth as follows:

Sec. 256.64  Requirements for filing of transfers.
    (a)(1) All instruments of transfer of a lease or of an interest 
therein as to any officially designated subdivision, including operating 
rights, subleases and assignments of record interest, shall be filed in 
triplicate for approval within 90 days from the date of final execution. 
They shall include a statement over the transferee's own signature with 
respect to citizenship and qualifications similar to that required of a 
lessee and shall contain all of the terms and conditions agreed upon by 
the parties thereto. Carried working interests, overriding royalty 
interests or payments out of production may be created

[[Page 447]]

or transferred without requirement for filing or approval.

                                * * * * *

    (c) Where an assignment creates a segregated lease, a bond shall be 
furnished in the amount prescribed in Sec. 256.58 of this part. Where an 
assignment does not create separate leases, the assignee, if the 
assignment so provides and the surety consents, may become a joint 
principal on the bond with the assignor.

                                * * * * *

    (g) Each obligation under any lease and under the regulations in 
this part shall inure to the heirs, executors, administrators, 
successors, or assignees of the lessee.

                                * * * * *



Sec. 256.65  Attorney General review.

    Prior to the approval of an assignment or transfer, the Secretary 
shall consult with and give due consideration to the views of the 
Attorney General. The Secretary may act on an assignment or transfer if 
the Attorney General has not responded to the request for consultation 
within 30 days of said request.



Sec. 256.67  Separate filings for assignments.

    A separate instrument of assignment shall be filed for each lease. 
When transfers to the same person, association or corporation, involving 
more than one lease are filed at the same time for approval, one request 
for approval and one showing as to the qualifications of the assignee 
shall be sufficient.



Sec. 256.68  Effect of assignment of a particular tract.

    (a) When an assignment is made of all the record title to a portion 
of the acreage in a lease, the assigned and retained portions become 
segregated into separate and distinct leases. In such a case, the 
assignee becomes a lessee of the Government as to the segregated tract 
that is the subject of assignment, and is bound by the terms of the 
lease as though the lease had been obtained from the United States in 
the assignee's own name, and the assignment, after its approval, shall 
be the basis of a new record. Royalty, minimum royalty and rental 
provisions of the original lease shall apply separately to each 
segregated portion.
    (b) For assignments of a portion of an oil and gas lease approved 
after the effective date of ths section, each segregated lease shall 
continue in full force and effect for the primary term of the original 
lease and so long thereafter as oil or gas is produced from that 
segregated portion of the leased area in paying quantities or drillng or 
well reworking operations as approved by the Secretary are conducted.
    (c) For those assignments approved prior to the effective date of 
this section, each segregated lease shall continue in full force and 
effect for the primary term of the original lease and so long thereafter 
as oil and gas may be produced from the original leased area in paying 
quantities or drilling or well reworking operations, as approved by the 
Secretary, are conducted.



Sec. 256.70  Extension of lease by drilling or well reworking operations.

    The term of a lease shall be extended beyond the primary term so 
long as drilling or well reworking operations are approved by the 
Secretary according to the conditions set forth in 30 CFR 250.13.

[44 FR 38276, June 29, 1979, as amended at 55 FR 32908, Aug. 13, 1990]



Sec. 256.71  Directional drilling.

    In accordance with an approved exploration plan or development and 
production plan, a lease may be maintained in force by directional wells 
drilled under the leased area from surface locations on adjacent or 
adjoining land not covered by the lease. In such circumstances, drilling 
shall be considered to have commenced on the leased area when drilling 
is commenced on the adjacent or adjoining land for the purpose of 
directional drilling under the leased area through any directional well 
surfaced on adjacent or adjoining land. Production, drillling or 
reworking of any such directional well shall be considered production or 
drilling or reworking operations on the leased area for all purposes of 
the lease.

[[Page 448]]



Sec. 256.72  Compensatory payments as production.

    If an oil and gas lessee makes compensatory payments and if the 
lease is not being maintained in force by other production of oil or gas 
in paying quantities or by other approved drilling or reworking 
operations, such payments shall be considered as the equivalent of 
production in paying quantities for all purposes of the lease.

[44 FR 38276, June 29, 1979. Redesignated at 47 FR 47006, Oct. 22, 1982, 
and amended at 54 FR 50617, Dec. 8, 1989]



Sec. 256.73  Effect of suspensions on lease term.

    (a) If the Regional Supervisor directs the suspension of either 
operations or production, or both, under the provisions of 30 CFR 250.10 
(a), (b)(2) through (b)(7), or (c) with respect to any lease in its 
primary term, the primary term of the lease shall be extended by a 
period equivalent to the period of the suspension.
    (b) If the Regional Supervisor orders or approves the suspension of 
either operations or production, or both, under the provision for 30 CFR 
250.10 (a), (b)(2) through (b)(7), or (c) with respect to any lease 
extended beyond its primary term, the term of the lease shall not be 
deemed to expire so long as the suspension remains in effect.

[44 FR 38276, June 29, 1979; 44 FR 55380, Sept. 26, 1979. Redesignated 
at 47 47006, Oct. 22, 1982, and amended at 54 FR 50617, Dec. 8, 1989]



                    Subpart K--Termination of Leases



Sec. 256.76  Relinquishment of leases or parts of leases.

    A lease or any officially designated subdivision thereof may be 
surrendered by the record title holder by filing a written 
relinquishment, in triplicate, with the appropriate OCS office of the 
MMS. No filing fee is required. A relinquishment shall take effect on 
the date it is filed subject to the continued obligation of the lessee 
and the surety to make all payments due, including any accrued rentals, 
royalties and deferred bonuses and to abandon all wells and condition or 
remove all platforms and other facilities on the land to be relinquished 
to the satisfaction of the Director.



Sec. 256.77  Cancellation of leases.

    (a) Any nonproducing lease issued under the act may be cancelled by 
the authorized officer whenever the lessee fails to comply with any 
provision of the act or lease or applicable regulations, if such failure 
to comply continues for 30 days after mailing of notice by registered or 
certified letter to the lease owner at the owner's record post office 
address. Any such cancellation is subject to judicial review as provided 
in section 23(b) of the Act.
    (b) Producing leases issued under the Act may be cancelled by the 
Secretary whenever the lessee fails to comply with any provision of the 
Act, applicable regulations or the lease only after judicial proceedings 
as prescribed by section 5(d) of the Act.
    (c) Any lease issued under the Act, whether producing or not, shall 
be canceled by the authorized officer upon proof that it was obtained by 
fraud or misrepresentation, and after notice and opportunity to be heard 
has been afforded to the lessee.
    (d) Pursuant to section 5(a) of the Act, the Secretary may cancel a 
lease when:
    (1) Continued activity pursuant to such lease would probably cause 
serious harm or damage to life, property, any mineral, national security 
or defense, or to the marine, coastal or human environment;
    (2) The threat of harm or damage will not disappear or decrease to 
an acceptable extent within a reasonable period of time; and
    (3) The advantages of cancellation outweigh the advantages of 
continuing such lease or permit in force. Procedures and conditions 
contained in 30 CFR 250.12 shall apply as appropriate.

[44 FR 38276, June 29, 1979; 44 FR 55380, Sept. 26, 1979. Redesignated 
at 47 FR 47006, Oct. 22, 1982]



                       Subpart L--Section 6 Leases



Sec. 256.79  Effect of regulations on lease.

    (a) All regulations in this part, insofar as they are applicable, 
shall supersede the provisions of any lease which is maintained under 
section 6(a) of the

[[Page 449]]

Act. However, the provisions of a lease relating to area, minerals, 
rentals, royalties (subject to sections 6(a) (8) and (9) of the Act), 
and term (subject to section 6(a)(10) of the Act and, as to sulfur, 
subject to section 6(b)(2) of the Act) shall continue in effect, and, in 
the event of any conflict or inconsistency, shall take precedence over 
these regulations.
    (b) A lease maintained under section 6(a) of the Act shall also be 
subject to all operating and conservation regulations applicable to the 
OCS. In addition, the regulations relating to geophysical and geological 
exploratory operations and to pipeline rights-of-way are applicable, to 
the extent that those regulations are not contrary to or inconsistent 
with the lease provisions relating to area, the minerals, rentals, 
royalties and term. The lessee shall comply with any provision of the 
lease as validated, the subject matter of which is not covered in the 
regulations in this part.

[44 FR 38276, June 29, 1979; 44 FR 55380, Sept. 26, 1979. Redesignated 
at 47 FR 47006, Oct. 22, 1982]



Sec. 256.80  Leases of other minerals.

    The existence of a lease that meets the requirements of section 6(a) 
of the Act shall not preclude the issuance of other leases of the same 
area for deposits of other minerals. However, no other lease of minerals 
shall authorize or permit the lessee thereunder unreasonably to 
interfere with or endanger operations under the existing lease. No 
sulphur leases shall be granted by the United States on any area while 
such area is included in a lease covering sulphur under section 6(b) of 
the Act.



                           Subpart M--Studies



Sec. 256.82  Environmental studies.

    (a) The Director shall conduct a study of any area or region 
included in any lease sale in order to establish information needed for 
assessment and management of impacts on the human, marine and coastal 
environments which may be affected by OCS oil and gas activities in such 
area or region. Any study shall, to the extent practicable, be designed 
to predict environmental impacts of pollutants introduced into the 
environments and of the impacts of offshore activities on the seabed and 
affected coastal areas.
    (b) Studies shall be planned and carried out in cooperation with the 
affected States and interested parties and, to the extent possible, 
shall not duplicate studies done under other laws. Where appropriate, 
the Director shall, to the maximum extent practicable, enter into 
agreements with the National Oceanic and Atmospheric Administration in 
executing the environmental studies responsibilities. By agreement, the 
Director may also utilize services, personnel or facilities of any 
Federal, State or local government agency in the conduct of such study.
    (c) Any study of an area or region required by paragraph (a) of this 
section for a lease sale shall be commenced not later than six months 
prior to holding a lease sale for that area. The Director may utilize 
information collected in any prior study. The Director may initiate 
studies for areas or regions not identified in the leasing program.
    (d) After the leasing and developing of any area or region, the 
Director shall conduct such studies as are deemed necessary to establish 
additional information and shall monitor the human, marine and coastal 
environments of such area or region in a manner designed to provide 
information which can be compared with the results of studies conducted 
prior to OCS oil and gas development. This shall be done to identify any 
significant changes in the quality and productivity of such 
environments, to establish trends in the areas studies, and to design 
experiments identifying the causes of such changes. Findings from such 
studies shall be used to recommend modifications in practices which are 
employed to mitigate the effects of OCS activities and to enhance the 
data/information base for predicting impacts which might result from a 
single lease sale or cumulative OCS activities.
    (e) Information available or collected by the studies program shall, 
to the extent practicable, be provided in a form and in a timeframe that 
can be used in the decision-making process associated with a specific 
leasing action or with

[[Page 450]]

longer term OCS minerals management responsibilities.

           Appendix A to Part 256--Oil and Gas Cash Bonus Bid

    The following bid is submitted for an oil and gas lease on the area 
of the Outer Continental Shelf specified below:

                                                                        
------------------------------------------------------------------------
                                                         Amount of cash 
   Tract No.*     Total amount bid   Amount per acre     submitted with 
                                     (or per hectare)         bid       
------------------------------------------------------------------------
                                                                        
                                                                        
------------------------------------------------------------------------
*Or, if tract numbers are not used, Protraction Diagram or Leasing Map  
  and block number.                                                     


                                                                        
------------------------------------------------------------------------
                                    Proportionate                       
                                     interest of                        
     Bidder qualification No.         company(s)    Name and address of 
                                      submitting      bidding company   
                                         bid                            
------------------------------------------------------------------------
---- Misc. No.....................  .............  .....................
------------------------------------------------------------------------

------------------------,
Authorized signatory's name and title.

[47 FR 25972, June 16, 1982. Redesignated at 47 FR 47006, Oct. 22, 1982]



PART 259--MINERAL LEASING: DEFINITIONS--Table of Contents




Sec.
259.001  Purpose and scope.
259.002  Definitions.

    Authority: Pub. L. 83-212, 67 Stat. 462, 43 U.S.C. 1331 et seq., as 
amended by Pub. L. 95-372, 92 Stat. 629.



Sec. 259.001  Purpose and scope.

    The purpose of this part 259 is to define various terms appearing in 
parts 260, 261 and 262 of this chapter.

[48 FR 1182, Jan. 11, 1983]



Sec. 259.002  Definitions.

    For purposes of parts 260, 261, and 262 of this chapter:
    Area or region means the geographic area or region over which the 
MMS designated official has jurisdiction, unless the context in which 
those words are used indicates that a different meaning is intended.
    Designated official means a representative of DOI subject to the 
direction and supervisory authority of the Director, MMS, and the 
appropriate Regional Manager of the MMS authorized and empowered to 
supervise and direct all oil and gas operations and to perform other 
duties prescribed in 30 CFR part 250 (offshore).
    Director means Director, MMS, DOI.
    DOI means the Department of the Interior, including the Secretary of 
the Interior, or his or her delegate.
    Federal lease means an agreement which, for any consideration, 
including, but not limited to, bonuses, rents or royalties conferred, 
and convenants to be observed, authorizes a person to explore for, or 
develop, or produce (or to do any or all of these) oil and gas, coal, 
oil shale, tar sands, and goethermal resources on lands or interests in 
lands under Federal jurisdiction.
    Gas means natural gas as defined by the Federal Energy Regulatory 
Commission.
    MMS means Minerals Management Service.
    OCS means the Outer Continental Shelf, which includes all submerged 
lands (1) that lie seaward outside of the area of lands beneath 
navigable waters as defined in the Submerged Lands Act (Pub. L. 31-35, 
67 Stat. 29, (43 U.S.C. 1301)) and (2) of which the subsoil and seabed 
appertain to the United States are subject to its jurisdiction and 
control.
    OCSLA means the Outer Continental Shelf Lands Act, as amended (Act 
of August 7, 1953, Ch. 345, 67 Stat. 462, 43 U.S.C. 1331 et seq., as 
amended by Pub. L. 95-372, 92 Stat. 629).
    Oil means a mixture of hydrocarbons that exists in a liquid or 
gaseous phase in an underground reservoir and which remains or becomes 
liquid at atmospheric pressure after passing through surface separating 
facilities, including condensate recovered by means other than a 
manufacturing process.

[48 FR 1182, Jan. 11, 1983]



PART 260--OUTER CONTINENTAL SHELF OIL AND GAS LEASING--Table of Contents




                      Subpart A--General Provisions

Sec.
260.001  Purpose and scope.

[[Page 451]]

260.002  Definitions.

                       Subpart B--Bidding Systems

260.101  Purpose and scope.
260.102  Definitions.
260.110  Bidding systems.
260.111  Criteria for selection of bidding systems and bidding system 
          components.

                          Subpart C [Reserved]

                        Subpart D--Joint Bidding

260.301  Purpose.
260.302  Definitions.
260.303  Joint bidding requirements.

    Authority: 43 U.S.C. 1331 and 1337.

    Source: 45 FR 9539, Feb. 12, 1980, unless otherwise noted. 
Redesignated at 48 FR 1182, Jan. 11, 1983.



                      Subpart A--General Provisions



Sec. 260.001  Purpose and scope.

    The purpose of this part 260 is to implement OCSLA, 43 U.S.C. 1331 
et seq., as amended, by providing regulations to foster competition 
including, but not limited to, regulations to prohibit joint bidding for 
development rights by certain types of joint ventures; the 
implementation of alternative bidding systems (including suspension of 
royalties for a period, volume, or value of production); and the 
establishment of diligence requirements for Federal OCS leases issued 
under the OCSLA.

[61 FR 3804, Feb. 2, 1996]



Sec. 260.002  Definitions.

    For purposes of this part 260:
    OCSLA means the Outer Continental Shelf Lands Act, (43 U.S.C. 1331 
et seq.), as amended.
    OCS lease means a Federal lease for oil and gas issued under the 
OCSLA.
    Person includes, in addition to a natural person, an association, a 
State, or a private, public, or municipal corporation.

[45 FR 9539, Feb. 12, 1980. Redesignated at 48 FR 1182, Jan. 11, 1983, 
as amended at 61 FR 3804, Feb. 2, 1996]



                       Subpart B--Bidding Systems



Sec. 260.101  Purpose and scope.

    (a) This subpart establishes the several bidding systems that may be 
utilized in connection with the offering and sale of Federal leases for 
the exploration, development and production of oil and gas resources 
located on the OCS.
    (b) Only bidding systems established by his subpart shall be 
utilized in OCS lease sales.



Sec. 260.102  Definitions.

    For purposes of this subpart B--
    Eligible lease means a lease that results from a sale held after 
November 28, 1995; is located in the Gulf of Mexico in water depths 200 
meters or deeper; lies wholly west of 87 degrees, 30 minutes west 
longitude; and is offered subject to a royalty suspension volume 
authorized by statute.
    Field means an area consisting of a single reservoir or multiple 
reservoirs all grouped on, or related to, the same general geological 
structural feature and/or stratigraphic trapping condition. There may be 
two or more reservoirs in a field that are separated vertically by 
intervening impervious strata, or laterally by local geologic barriers, 
or by both.
    Highest responsible qualified bidder means a person who has met the 
appropriate requirements of 30 CFR part 256, subpart G and has submitted 
a bid higher than any other bids by qualified bidders on the same tract.
    Highest royalty rate means the highest per centum rate payable to 
the United States, as specified in the lease, in amount or value of the 
production saved, removed or sold.
    Lowest royalty rate means the lowest per centum rate payable to the 
United States, as specified in the lease, in amount or value of the 
production saved, removed or sold.
    OCS lease sale means the DOI proceeding by which leases for certain 
OCS tracts are offered for sale by competitive bidding and during which 
bids are received, announced and recorded.
    Production period means the period during which the amount of oil 
and gas produced from a tract, or, if the tract is unitized, the amount 
of oil and gas as allocated under a unitization formula, will be 
measured for purposes of determining the amount of royalty payable to 
the United States.

[[Page 452]]

    Qualified bidder means a person, who has met the appropriate 
requirements of 30 CFR part 256, subpart G.
    Tract means a designation assigned solely for administrative 
purposes to a block or combination of blocks that are identified by a 
leasing map or an official protraction diagram prepared by DOI.
    Value of production means the value of all oil and gas production 
saved, removed or sold from a tract, or, if the tract is unitized, the 
value of all oil and gas production saved, removed or sold and credited 
to the tract under a unitization formula, during a production period, 
which value is determined in accordance with Sec. 260.110(b).

[45 FR 9539, Feb. 12, 1980. Redesignated at 48 FR 1182, Jan. 11, 1983, 
as amended at 61 FR 12027, Mar. 25, 1996]



Sec. 260.110  Bidding systems.

    (a) A single bidding system selected from those listed in this 
paragraph shall be applied to each tract included in an OCS lease sale.
    (1) Cash bonus bid with a fixed royalty rate of not less than 12\1/
2\ per centum in amount or value of the production saved, removed or 
sold and an annual rental. (i) The royalty rate to be paid by the 
highest responsible qualified bidder shall be a percentage of the amount 
or value of the production saved, removed or sold. Such royalty rate 
shall not be less than 12\1/2\ per centum at the beginning of the lease 
period in amount or value of production and shall be specified in the 
notice of OCS lease sale published in the Federal Register.
    (ii) The amount of cash bonus to be paid is determined by the 
qualified bidder submitting the bid. Any deferment and the schedule of 
payments shall be included in the notice of OCS lease sale published in 
the Federal Register.
    (iii) The annual rental to be paid by the highest responsible 
qualified bidder and any amounts creditable against future royalties 
shall be specified in the notice of sale published in the Federal 
Register.
    (2) Royalty rate bid based on per centum in amount or value of the 
production saved, removed or sold, with a fixed cash bonus and an annual 
rental. (i) The royalty rate to be paid is determined by the qualified 
bidder submitting the bid and shall be based on a percentage of the 
amount or value of the production saved, removed, or sold.
    (ii) The cash bonus to be paid by the highest responsible qualified 
bidder shall be an amount specified in the notice of OCS lease sale 
published in the Federal Register.
    (iii) Rental payment amounts must be as specified in paragraph 
(a)(1)(iii) of this section.
    (3) Cash bonus bid with diminishing or sliding royalty rate of not 
less than 12\1/2\ per centum at the beginning of the lease period in 
amount or value of the production saved, removed, or sold, and annual 
rental. (i)(A) The royalty rate to be paid by the highest responsible 
qualified bidder shall be a percentage of the amount or value of the 
production saved, removed or sold. The royalty rate shall be calculated 
by utilizing either a sliding scale formula, which relates the royalty 
rate established thereby to the adjusted value of the oil and gas 
produced during the production period, or a schedule that establishes 
the royalty rate that will be applied to specified ranges of adjusted 
value of production. The description of the sliding scale formula or 
schedule shall include the relationship between adjusted value of 
production and royalty rate, and a stipulation of the lowest royalty 
rate and highest royalty rate. The sliding scale formula or schedule 
shall be included in the lease issued to the person who is the 
successful bidder as one of the lease terms and conditions.
    (B) The royalty rate shall not be less than 12\1/2\ per centum at 
the beginning of the lease period in amount or value of the production 
saved, removed or sold and shall be specified in the notice of OCS lease 
sale published in the Federal Register.
    (C) Royalty payment calculation. (1) The royalty rate utilized in 
the calculation of royalty payments is based on an adjusted value of 
production, and is established through application of a sliding scale 
formula or a schedule to the adjusted value of production.
    (2) The adjusted value of production shall be determined by applying 
an inflation factor to the actual value of production.

[[Page 453]]

    (3) The established royalty rate is applied to the actual value of 
production, which results in the determination of amount in dollars to 
be paid to the United States by the person awarded the lease or the 
amount of royalty oil and gas to be taken in kind by the United States.
    (4) The production period, inflation factor and procedures for 
making the inflation adjustment and for determining the value or amount 
of production shall be stated in the notice of sale published in the 
Federal Register.
    (ii) The amount of cash bonus to be paid is determined by the 
qualified bidder submitting the bid. Any deferment and the schedule of 
payments shall be included in the notice of OCS lease sale published in 
the Federal Register.
    (iii) Rental payment amounts must be as specified in paragraph 
(a)(1)(iii) of this section.
    (4) Cash bonus bid with a fixed share of the net profits of no less 
than 30 per centum to be derived from the production of oil and gas from 
the lease area and a fixed annual rental--(i) Net profit share payment 
calculation. The amount of the net profit share payment to the United 
States by the person awarded the lease shall be determined for each 
month by multiplying the net profit share base times the net profit 
share rate, in accordance with Sec. 220.022.
    (A) Net profit share base. (1) The net profit share base shall be 
calculated in accordance with Sec. 220.021.
    (2) The capital recovery factor needed to calculate the allowance 
for capital recovery, in accordance with Sec. 220.020, shall be 
specified in the notice of OCS lease sale published in the Federal 
Register and may vary from tract to tract.
    (B) Net profit share rate. The net profit share rate, which 
determines the fixed share of the net profits owed to the United States, 
shall be a percentage that is specified in the notice of OCS lease sale 
published in the Federal Register. Such net profit share rate shall not 
be less than 30 percent of the net profit share base and may vary from 
tract to tract.
    (ii) The amount of cash bonus to be paid is determined by the person 
submitting the bid. Any deferment and the schedule of payments shall be 
included in the notice of OCS lease sale published in the Federal 
Register.
    (iii) The annual rental to be paid by the person awarded the lease 
shall be the amount specified in the notice of OCS lease sale published 
in the Federal Register.
    (5) Cash bonus bid with a variable royalty rate or rates during one 
or more production periods in amount or value of the production saved, 
removed or sold, and an annual rental. MMS may suspend or defer the 
royalty due for a period, volume, or value of production. Such 
suspensions or deferrals may vary based on changes in the prices of oil 
and/or gas as specified in the notice of sale published in the Federal 
Register.
    (i) The royalty rate due on production may be less than 12\1/2\ per 
centum, but greater than zero per centum, at any designated time during 
the lease period based on the amount or value of production saved, 
removed, or sold. Royalty may be suspended or deferred for a period, 
volume, or value of production. The applicable royalty rate(s) and 
suspension or deferral magnitudes or formulas shall be specified in the 
notice of sale published in the Federal Register.
    (ii) The amount and the procedure for payment of a cash bonus must 
be as specified in paragraph (a)(1)(ii) of this section.
    (iii) Rental payment amounts must be as specified in paragraph 
(a)(1)(iii) of this section.
    (6) Cash bonus bid with a royalty rate or rates based on formula(s) 
or schedule(s) during one or more production periods in amount or value 
of the production saved, removed or sold, and an annual rental. Royalty 
may be suspended or deferred for a period, volume, or value of 
production. Such a suspension or deferral may vary based on changes in 
the prices of oil and/or gas as specified in the notice of sale 
published in the Federal Register.
    (i) The royalty due on production shall be specified as a percentage 
of the amount or value of the production saved, removed, or sold. When 
the value of production is used, by unit or in aggregate, the royalty 
rate will be determined based on prices for oil and/or gas as specified 
in the notice of sale published in the Federal Register.

[[Page 454]]

    (A) The lessee must calculate the royalty due using the formula or 
schedule specified in the lease based on the adjusted amount or indexed 
value of the oil and gas produced. The formula or schedule will describe 
the relationship between the adjusted or actual amount of production, 
indexed value, or indexed price, and the royalty rate. It will stipulate 
the lowest and highest royalty rates.
    (B) The royalty rate formula or schedule and the suspension or 
deferral magnitudes or formulas shall be specified in the notice of sale 
published in the Federal Register.
    (C) Royalty payment calculation.
    (1) The royalty rate used to calculate the royalty due on production 
is based on an adjusted or actual amount of production, indexed value, 
or indexed price and is set through application of the specified formula 
or schedule to the designated production period.
    (2) The lessee will determine the adjusted amount or indexed value, 
or indexed price by applying an index or inflation factor specified in 
the lease to the actual amount or value of production, or to the 
adjusted price.
    (3) The lessee must apply the royalty rate to the actual value of 
production. The result is the amount in dollars that the lessee must pay 
to the United States, or the amount of royalty oil and/or gas that the 
United States will take in kind.
    (4) The production period, inflation factor and procedures for 
making the inflation adjustment and for determining the value or amount 
of production shall be stated in the notice of sale published in the 
Federal Register.
    (ii) The amount and the procedure for payment of a cash bonus must 
be as specified in paragraph (a)(1)(ii) of this section.
    (iii) Rental payment amounts must be as specified in paragraph 
(a)(1)(iii) of this section.
    (7) Cash bonus bid with a royalty rate of not less than 12\1/2\ per 
centum fixed in amount or value of the production saved, removed or 
sold, and with suspension of royalties for a period, volume, or value of 
production, and an annual rental. Royalty may be suspended for a period, 
volume, or value of production. Such a suspension may vary based on 
changes in the prices of oil and/or gas as specified in the notice of 
sale published in the Federal Register.
    (i) Except for a period of suspension, the royalty rate due on 
production will be specified as a percentage of the amount or value of 
the production saved, removed, or sold. The applicable royalty rate 
shall be specified in the notice of the lease sale published in the 
Federal Register. When the royalty rate is applied to the value of 
production, by unit or in aggregate, the royalty rate will be determined 
based on the prices for oil and/or gas as specified in the notice of 
sale published in the Federal Register.
    (A) The lessee must calculate the royalty due using the formula or 
schedule specified in the lease agreement based on the adjusted amount 
or indexed value of the oil and gas produced. The formula or schedule 
will describe the relationship between adjusted or actual amount of 
production, indexed value, or indexed price, and the royalty rate. It 
will stipulate the lowest and highest royalty rates that may apply.
    (B) The formula or schedule for royalty due on production and the 
suspension magnitudes or formulas shall be specified in the notice of 
sale published in the Federal Register.
    (ii) The amount and the procedure for payment of a cash bonus must 
be as specified in paragraph (a)(1)(ii) of this section.
    (iii) Rental payment amounts must be as specified in paragraph 
(a)(1)(iii) of this section.
    (b) The value basis for determining the actual value of production 
and for purposes of computing royalty in accordance with the bidding 
systems established by paragraph (a) of this section shall be as 
described in 30 CFR 206.102, 206.152, and 206.153; Provided, however, 
That with respect to oil, the first sale of which is controlled under 10 
CFR part 212, the value shall not exceed the lawful first sale price of 
such oil; and Provided further, That with respect to gas, the value 
shall not exceed the sale price established by the Federal Energy 
Regulatory Commission.
    (c) MMS may, by rule, add to or modify the bidding systems listed in 
paragraph (a) of this section, in accordance with the procedural 
requirements of

[[Page 455]]

OCSLA, 43 U.S.C. 1331 et seq., as amended by Pub. L. 95-372, 92 Stat. 
629.
    (d) This paragraph explains how the royalty suspension volumes in 
section 304 of the Outer Continental Shelf Deep Water Royalty Relief 
Act, Pub. L. 104-58, apply to eligible leases. For purposes of this 
paragraph, any volumes of production that are not royalty bearing under 
the lease or the regulations in this chapter do not count against 
royalty suspension volumes. Also, for the purposes of this paragraph, 
production includes volumes allocated to a lease under an approved unit 
agreement.
    (1) Your eligible lease may receive a royalty suspension volume only 
if your lease is in a field where no current lease produced oil or gas 
(other than test production) before November 28, 1995. Paragraph (d) of 
this section applies only to eligible leases in fields meeting this 
condition.
    (2) The Final Notice of Sale will specify the water depth for each 
eligible lease. Our determination of water depth for each lease is final 
once we issue the lease. The Notice also will specify the royalty 
suspension volume applicable to each water depth. The minimum royalty 
suspension volumes for fields are:
    (i) 17.5 mmboe in 200 to 400 meters of water;
    (ii) 52.5 mmboe in 400 to 800 meters of water; and
    (iii) 87.5 mmboe in more than 800 meters of water.
    (3) When production (other than test production) first occurs from 
any of the eligible leases in a field, we will determine what royalty 
suspension volume applies to the eligible lease(s) in that field. The 
determination is based on the royalty suspension volumes specified in 
paragraph (d)(2) of this section.
    (4) If a new field consists of eligible leases in different water 
depth categories, the royalty suspension volume associated with the 
deepest eligible lease applies.
    (5) If your eligible lease is the only eligible lease in a field, 
you do not owe royalty on the production from your lease up to the 
applicable royalty suspension volume.
    (6) If a field consists of more than one eligible lease, payment of 
royalties on the eligible leases' initial production is suspended until 
their cumulative production equals the field's established royalty 
suspension volume. The royalty suspension volume for each eligible lease 
is equal to each lease's actual production (or production allocated 
under an approved unit agreement) until the field's established royalty 
suspension volume is reached.
    (7) If an eligible lease is added to a field that has an established 
royalty suspension volume, the field's royalty suspension volume will 
not change even if the added lease is in deeper water. The additional 
lease may receive a royalty suspension volume only to the extent of its 
production before the cumulative production from all eligible leases in 
the field equals the field's previously established royalty suspension 
volume.
    (8) If we reassign a well on an eligible lease to another field, the 
past production from that well will count toward the royalty suspension 
volume, if any, specified for the new field to which it is assigned. The 
past production will not be counted toward the suspension volume, if 
any, from the first field.
    (9) You may receive a royalty suspension volume only if your entire 
lease is west of 87 degrees, 30 minutes west longitude. A field that 
lies on both sides of this meridian will receive a royalty suspension 
volume only for those eligible leases lying entirely west of the 
meridian.
    (10) Your lease may obtain more than one royalty suspension volume. 
If a new field is discovered on your eligible lease that already 
benefits from the royalty suspension volume for another field, 
production from that new field receives a separate royalty suspension.
    (11) You must measure natural gas production subject to the royalty 
suspension volume as follows: 5.62 thousand cubic feet of natural gas 
equals

[[Page 456]]

one barrel of oil equivalent, as measured at 15.025 psi, 60 degrees 
Fahrenheit, and fully saturated.

[45 FR 9539, Feb. 12, 1980, as amended at 45 FR 36800, May 30, 1980; 46 
FR 29689, June 2, 1981; 46 FR 35625, July 9, 1981. Redesignated at 48 FR 
1182, Jan. 11, 1983, and amended at 48 FR 24874, June 3, 1983; 56 FR 
23648, May 23, 1991; 61 FR 3804, Feb. 2, 1996; 61 FR 12027, Mar. 25, 
1996]



Sec. 260.111  Criteria for selection of bidding systems and bidding system components.

    (a) In analyzing the application of one of the bidding systems 
listed in Sec. 260.110(a) to tracts selected for any OCS lease sale, MMS 
may, in its discretion, consider the following purposes and policies, 
recognizing that each of the purposes and policies may not be 
specifically applicable to the selection process for a particular 
bidding system and tract or may present a conflict that will have to be 
resolved in the process of bidding system selection, and that the order 
of listing does not denote a ranking:
    (1) Providing fair return to the Federal Government;
    (2) Increasing competition;
    (3) Assuring competent and safe operations;
    (4) Avoiding undue speculation;
    (5) Avoiding unnecessary delays in exploration, development, and 
production;
    (6) Discovering and recovering oil and gas;
    (7) Developing new oil and gas resources in an efficient and timely 
manner;
    (8) Limiting administrative burdens on Government and industry; and
    (9) Providing an opportunity to experiment with various bidding 
systems to enable the identification of those that are the most 
appropriate for the satisfaction of the objectives of the United States 
in OCS lease sales.
    (b) In performing the analysis referred to in paragraph (a), MMS 
may, in its discretion, take into account the following in relation to 
their impact upon the purposes and policies enumerated in paragraph (a) 
of this section.
    (c) The bidding systems listed in Sec. 260.110(a) (2) and (3) shall 
be applied to not less than 20 per centum and not more than 60 per 
centum of the total area offered for leasing each year during the five-
year period commencing on September 18, 1978, unless DOI determines that 
the maximum and minimum per centum limitations set forth in this section 
are inconsistent with the purposes and policies of the OCSLA.

[45 FR 9539, Feb. 12, 1980. Redesignated and amended at 48 FR 1182, Jan. 
11, 1983]



                          Subpart C [Reserved]



                        Subpart D--Joint Bidding

    Source: 45 FR 62031, Sept. 18, 1980, unless otherwise noted. 
Redesignated at 48 FR 1182, Jan. 11, 1983.



Sec. 260.301  Purpose.

    The purpose of the regulations in this subpart D is to encourage 
participation in OCS oil and gas lease sales by limiting the requirement 
for filing Statements of Production to certain joint bidders.



Sec. 260.302  Definitions.

    For purposes of this subpart D, all the terms used shall be defined 
as in 30 CFR 256.38.



Sec. 260.303  Joint bidding requirements.

    (a) Any person who submits a joint bid for any OCS oil and gas lease 
during a six-month bidding period and who was chargeable for the prior 
production period with an average daily production in excess of 1.6 
million barrels of crude oil, natural gas equivalents, and liquefied 
petroleum products, shall have filed a Statement of Production with the 
Director, MMS, in accordance with the requirements of 30 CFR 256.38. The 
Statement of Production shall state that the person filing the Statement 
is chargeable for the prior production period with an average daily 
production in excess of 1.6 million barrels of crude oil, natural gas 
equivalents, and liquefied petroleum products.
    (b) No person chargeable for the prior production period with an 
average daily production in excess of 1.6 million barrels of crude oil, 
natural gas equivalents, and liquefied petroleum products may submit a 
joint bid for any OCS oil and gas lease during the applicable six-

[[Page 457]]

month bidding period with any other person similarly chargeable. Such 
bids shall be disqualified and rejected.
    (c) No person may submit any bid during the applicable six-month 
bidding period pursuant to any agreement, the terms of which would 
result in two or more persons, each chargeable for the prior production 
period with an average daily production in excess of 1.6 million barrels 
of crude oil, natural gas equivalents, and liquefied petroleum products, 
acquiring or holding any interest in the tract for which the bid is 
submitted. Such bids shall be disqualified and rejected.



PART 270--NONDISCRIMINATION IN THE OUTER CONTINENTAL SHELF--Table of Contents




Sec.
270.1  Purpose.
270.2  Application of this part.
270.3  Definitions.
270.4  Discrimination prohibited.
270.5  Complaint.
270.6  Process.
270.7  Remedies.

    Authority: Sec. 604, Pub. L. 95-372, 92 Stat. 695 (43 U.S.C. 1863).

    Source: 50 FR 21048, May 22, 1985, unless otherwise noted.



Sec. 270.1  Purpose.

    The purpose of this part is to implement the provisions of section 
604 of the OCSLA of 1978 which provides that ``no person shall, on the 
grounds of race, creed, color, national origin, or sex, be excluded from 
receiving or participating in any activity, sale, or employment, 
conducted pursuant to the provisions of . . . the Outer Continental 
Shelf Lands Act.''



Sec. 270.2  Application of this part.

    This part applies to any contract or subcontract entered into by a 
lessee or by a contractor or subcontractor of a lessee after the 
effective date of these regulations to provide goods, services, 
facilities, or property in an amount of $10,000 or more in connection 
with any activity related to the exploration for or development and 
production of oil, gas, or other minerals or materials in the OCS under 
the Act.



Sec. 270.3  Definitions.

    As used in this part, the following terms shall have the meanings 
given below:
    Contract means any business agreement or arrangement (in which the 
parties do not stand in the relationship of employer and employee) 
between a lessee and any person which creates an obligation to provide 
goods, services, facilities, or property.
    Lessee means the party authorized by a lease, grant of right-of-way, 
or an approved assignment thereof to explore, develop, produce, or 
transport oil, gas, or other minerals or materials in the OCS pursuant 
to the Act and this part.
    Person means a person or company, including but not limited to, a 
corporation, partnership, association, joint stock venture, trust, 
mutual fund, or any receiver, trustee in bankruptcy, or other official 
acting in a similar capacity for such company.
    Subcontract means any business agreement or arrangement (in which 
the parties do not stand in the relationship of employer and employee) 
between a lessee's contractor and any person other than a lessee that is 
in any way related to the performance of any one or more contracts.



Sec. 270.4  Discrimination prohibited.

    No contract or subcontract to which this part applies shall be 
denied to or withheld from any person on the grounds of race, creed, 
color, national origin, or sex.



Sec. 270.5  Complaint.

    (a) Whenever any person believes that he or she has been denied a 
contract or subcontract to which this part applies on the grounds of 
race, creed, color, national origin, or sex, such person may complain of 
such denial or withholding to the Regional Director of the OCS Region in 
which such action is alleged to have occurred. Any complaint filed under 
this part must be submitted in writing to the appropriate Regional 
Director not later than 180 days after the date of the alleged unlawful 
denial of a contract or subcontract which is the basis of the complaint.

[[Page 458]]

    (b) The complaint referred to in paragraph (a) of this section shall 
be accompanied by such evidence as may be available to a person and 
which is relevant to the complaint including affidavits and other 
documents.
    (c) Whenever any person files a complaint under this part, the 
Regional Director with whom such complaint is filed shall give written 
notice of such filing to all persons cited in the complaint no later 
than 10 days after receipt of such complaint. Such notice shall include 
a statement describing the alleged incident of discrimination, including 
the date and the names of persons involved in it.



Sec. 270.6  Process.

    Whenever a Regional Director determines on the basis of any 
information, including that which may be obtained under Sec. 270.5 of 
this title, that a violation of or failure to comply with any provision 
of this subpart probably occurred, the Regional director shall undertake 
to afford the complainant and the person(s) alleged to have violated the 
provisions of this part an opportunity to engage in informal 
consultations, meetings, or any other form of communications for the 
purpose of resolving the complaint. In the event such communications or 
consultations result in a mutually satisfactory resolution of the 
complaint, the complainant and all persons cited in the complaint shall 
notify the Regional Director in writing of their agreement to such 
resolution. If either the complainant or the person(s) alleged to have 
wrongfully discriminated fail to provide such written notice within a 
reasonable period of time, the Regional Director shall proceed in 
accordance with the provisions of Secs. 250.70, 250.71, 250.72, and 
250.80 of this title.



Sec. 270.7  Remedies.

    In addition to the penalties available under Secs. 250.81-1 and 
250.80-2 of this title, the Director may invoke any other remedies 
available to him or her under the Act or regulations for the lessee's 
failure to comply with provisions of the Act, regulations, or lease.



PART 280--PROSPECTING FOR MINERALS OTHER THAN OIL, GAS, AND SULPHUR IN THE OUTER CONTINENTAL SHELF--Table of Contents




Sec.
280.0  Authority for information collection.
280.1  Purpose and applicability.
280.2  Definitions.
280.3  Activities requiring a permit.
280.4  Term of permit.
280.5  Application for a prospecting or scientific research permit.
280.6  Prospecting or scientific research plan.
280.7  Obligations of persons.
280.8  Reporting.
280.9  Recordkeeping.
280.10  Environmental effects.
280.11  Notification.
280.12  Disclosure of information to the public.
280.13   Disclosure of data and information to the adjacent States.
280.14  Suspension or temporary prohibition of activities.
280.15  Cancellation or relinquishment.
280.16  Remedies and penalties.
280.17  Appeals.

    Authority: 43 U.S.C. 1331 et seq., 42 U.S.C. 4332 et seq.

    Source: 53 FR 25256, July 5, 1988, unless otherwise noted.



Sec. 280.0  Authority for information collection.

    The information collection requirements contained in part 280 have 
been approved by the Office of Management and Budget (OMB) under 44 
U.S.C. 3501 et seq. and assigned OMB clearance number 1010-0072. The 
information is being collected to inform the Minerals Management Service 
(MMS) of OCS minerals activities. The information will be used to ensure 
that such activities are conducted in a safe and environmentally 
responsible manner in compliance with governing laws and regulations. 
The obligation to respond is mandatory.



Sec. 280.1  Purpose and applicability.

    Section 5(a) of the Act (43 U.S.C. 1334(a)(1)) states that the 
Secretary ``* * * shall prescribe such rules and regulations * * * 
necessary to carry out * * *'' the provisions of the Act. The primary 
purpose of the regulations

[[Page 459]]

in this part is to prescribe policies, procedures, and requirements for 
conducting data and information-gathering activities associated with 
geological and geophysical (G&G) prospecting and scientific research in 
the OCS for minerals other than oil, gas, and sulphur. The regulations 
in this part do not apply to activities authorized under a mineral 
lease. Activities authorized under the regulations in this part do not 
give rise to any rights or interests in any OCS mineral discovered as a 
result of approved prospecting or scientific research activities.



Sec. 280.2  Definitions.

    When used in this part, the following terms shall have the meaning 
given below:
    Act means the OCS Lands Act, as amended (43 U.S.C. 1331 et seq.)
    Adjacent State means with respect to any activity proposed, 
conducted, or approved under this part, any coastal State(s)--(1) That 
is used, or is scheduled to be used, as a support base for G&G 
prospecting or scientific research activities; or (2) in which there is 
a reasonable probability of significant effect on land or water uses 
from such activity.
    Archaeological resource means any material remains of human life or 
activities that are at least 50 years of age and that are of 
archaeological interest.
    Data means G&G facts and statistics or samples which have not been 
analyzed, processed, or interpreted.
    Director means the Director of the MMS of the U.S. Department of the 
Interior or an official authorized to act on the Director's behalf.
    Geological and geophysical (G&G) scientific research means any 
investigation conducted in the OCS for scientific research purposes 
which involves the gathering and analysis of G&G data and information 
which are made available to the public for inspection and reproduction 
at the earliest practicable time. This does not include scientific 
research related to oil, gas, and sulphur.
    Geological sample means a collected portion of the seabed, the 
subseabed, or the overlying waters acquired while conducting prospecting 
or scientific research activities.
    Governor means the Governor of a State or the person or entity 
lawfully designated to exercise the powers granted to a State Governor.
    Information means G&G data that has been analyzed, processed, or 
interpreted.
    Lease means one of the following, whichever is required by the 
context: Any form of authorization which is issued under section 8 or 
maintained under section 6 of the Act and which authorizes exploration 
for, and development and production of, specific minerals or the area 
covered by that authorization.
    Material remains means physical evidence of human habitation, 
occupation, use, or activity, including the site, location, or context 
in which such evidence is situated.
    Minerals has the same meaning as the term is defined in section 2(q) 
of the Act.
    National Environmental Policy Act (NEPA) means the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).
    OCS minerals means any mineral found on or below the surface of the 
seabed but does not include oil, gas, or sulphur.
    Of archaeological interest means capable of providing scientific or 
humanistic understanding of past human behavior, cultural adaptation, 
and related topics through the application of scientific or scholarly 
techniques, such as controlled observation, contextual measurements, 
controlled collection, analysis, interpretation, and explanation.
    Outer Continental Shelf (OCS) means all submerged lands lying 
seaward and outside of the area of lands beneath navigable waters as 
defined in section 2 of the Submerged Lands Act (43 U.S.C. 1301) and of 
which the subsoil and seabed appertain to the United States and are 
subject to its jurisdiction and control.
    Permit means the contract or agreement, other than a lease, approved 
pursuant to this part under which a person acquires the right to conduct 
prospecting or scientific research activities.
    Permittee means the person authorized by a permit issued pursuant to

[[Page 460]]

this part to conduct prospecting or scientific research activities in 
the OCS.
    Person means a citizen or national of the United States; an alien 
lawfully admitted for permanent residency in the United States as 
defined in 8 U.S.C. 1101(a)(20); a private, public, or municipal 
corporation organized under the laws of the United States or of any 
State or territory thereof; and an association of such citizens, 
nationals, resident aliens, or private, public, or municipal 
corporations, States, or political subdivisions of States; or anyone 
operating in a manner provided for by treaty or other applicable 
international agreements. The term does not include Federal Agencies.
    Prospecting activities means the gathering of any G&G data and 
information for the purpose of determining the feasibility of commercial 
recovery, which has as its objective the establishment and documentation 
of the nature, shape, concentration, location, and tenor of an OCS 
mineral resource. Such activities shall include (1) geophysical surveys 
where magnetic, gravity, seismic, or other systems are used to detect or 
imply the presence of minerals; and (2) the gathering through drilling 
or other means of geological samples which could be used for the purpose 
of discovering, characterizing, or evaluating OCS mineral deposits. 
Prospecting activities do not include G&G scientific research.
    Secretary means the Secretary of the Interior or an official 
authorized to act on the Secretary's behalf.
    Significant archaeological resource means those archaeological 
resources that meet the criteria of significance for eligibility to the 
National Register of Historic Places as defined in 36 CFR 60.4.

[53 FR 25256, July 5, 1988, as amended at 59 FR 53094, Oct. 21, 1994]



Sec. 280.3   Activities requiring a permit.

    (a) No prospecting activities shall be conducted in the OCS without 
a permit approved by the Director pursuant to this part, unless such 
activities are being conducted pursuant to authority contained in a 
lease issued or maintained under part 256 or part 281 of this title or 
unless such activities are conducted by a Federal Agency.
    (b) No person may conduct G&G scientific research activities in the 
OCS without a permit approved by the Director pursuant to this part if 
the proposed activities include either: (1) The drilling of a borehole 
to a depth greater than 300 feet below the seafloor; or (2) the use of 
solid or liquid explosives.
    (c) Any person may conduct G&G scientific research in the OCS 
without obtaining a permit pursuant to this part if--
    (1) The activities will not interfere with or endanger operations 
under any lease or right-of-way maintained or issued pursuant to the 
Act;
    (2) The activities will not be unduly harmful to aquatic life in the 
area; result in pollution; create hazardous or unsafe conditions; 
unreasonably interfere with other uses of the area; or disturb any site, 
structure, or object of historical or archaeological significance; and
    (3) The person conducting the activities or operating the vessel 
from which the activities are to be conducted has consulted and 
coordinated the conduct of those activities with any other users of the 
area.
    (d) The Director may orally approve plan revisions or issue 
emergency permits to accommodate unforeseen or special circumstances. 
Oral approvals given for a written application shall be followed with a 
written confirmation by MMS. In the event an oral approval is given in 
response to an oral request, the applicant shall confirm the oral 
request in writing within 72 hours of the approval.



Sec. 280.4   Term of permit.

    Permits approved under this part shall be granted for a term not to 
exceed 3 years. The Director may extend the term of a permit for an 
additional period(s) of time not to exceed a total of 2 years when the 
Director determines that the additional time is appropriate based upon a 
showing of good cause by the permittee.



Sec. 280.5  Application for a prospecting or scientific research permit.

    (a) An application for a prospecting or scientific research permit 
shall be submitted to the Director at least 60 days prior to the date 
proposed as the

[[Page 461]]

startup date for activities in the permit area.
    (b)(1) An application for a prospecting permit shall be submitted in 
a form and manner approved by the Director. Three copies of each 
application shall be submitted and shall include--
    (i) The name, address, and nationality of the person(s) submitting 
the application;
    (ii) The name, address, and telephone number of the person(s) 
directly responsible for conducting the activities proposed;
    (iii) A description and a map of the area(s) covered by the 
application;
    (iv) The period of time to be covered by the primary term of the 
permit not to exceed 3 years;
    (v) A narrative description in nonproprietary terms of the 
activities to be conducted, such as mapping, geophysical surveying, 
drilling, bottom sampling, and dredging;
    (vi) A detailed description and schedule giving the estimated 
starting and completion dates for the proposed activities that are to be 
authorized under the permit; and
    (vii) A prospecting plan.
    (2) An applicant for a prospecting permit shall indicate which data 
and information included in the application and plan the applicant 
considers proprietary.
    (c) Upon application submitted by a permittee pursuant to this 
section, the Director may approve the conversion of a permit issued 
under part 251 of this title to a permit issued under this part. A 
permit issued under part 251, which is converted to a permit issued 
under this part, shall be subject to all the requirements of this part.
    (d) An application for a permit to conduct scientific research 
activities shall be submitted in a form approved by the Director. The 
application should be signed by an officer of the organization proposing 
to carry out the activity and shall state--
    (1) The name of the person conducting the proposed research;
    (2) The type of research activity and manner in which it will be 
conducted;
    (3) The location designated on a map, plat, or chart where the 
research activity will be conducted;
    (4) A schedule indicating the starting and completion dates for each 
proposed scientific research activity;
    (5) The proposed time and manner in which the information and data 
resulting from the research will be made available to the public for 
inspection and reproduction, such time being the earliest practicable 
time;
    (6) An agreement that the information and data resulting from the 
scientific research activity will not be sold or withheld for exclusive 
use;
    (7) The name, registry number, registered owner, and port of 
registry of vessels used in the operation; and
    (8) A scientific research plan.
    (e) Within 30 days following the receipt of an application for a 
permit and the accompanying plan which does not require preparation of 
an environmental analysis the Director shall--
    (1) Approve the application and plan;
    (2) Require the applicant to modify the application and/or plan; or
    (3) Disapprove the application and plan. If the Director disapproves 
an application and plan, the statement of rejection shall give the 
reasons for the disapproval and shall advise the applicant of the 
changes needed to obtain approval.



Sec. 280.6  Prospecting or scientific research plan.

    (a) The applicant shall submit a plan with its application for a 
prospecting or scientific research permit. The plan shall include--
    (1) Identification of the mineral(s) or material(s) of primary 
interest, if appropriate;
    (2) A detailed description of the activities to be conducted;
    (3) The type(s) of equipment to be used with special attention to 
safety and pollution prevention and control features and the name, 
registration, and mobile communication system of vessel(s);
    (4) Maps showing location of proposed activities including drill 
holes, grab or basket samples, anticipated depth of penetration of drill 
holes, water depth, and location of proposed survey grids for each 
surveying method which is to be employed;

[[Page 462]]

    (5) A schedule indicating the starting and completion dates for each 
proposed activity;
    (6) Anticipated environmental consequences of each proposed 
activity;
    (7) Mitigation measures to be used to avoid or minimize adverse 
environmental impacts of proposed activities;
    (8) For any activities which are to occur in an environmentally 
sensitive area, a plan for monitoring the effects of the activities on 
the environment;
    (9) Any known archaeological resources in the area of the proposed 
activities; and
    (10) Description of any potential conflicts with other uses or users 
in the permit area.
    (b) If the penetration of one or more proposed drill holes will 
exceed 300 feet, the Director may require a drilling plan to be included 
as part of the plan before a permit is issued.
    (c) If all needed information is not available at the time the plan 
is submitted, a plan shall indicate when the needed information will be 
obtained and submitted. In such a case, depending on the significance of 
the missing information, the Director may disapprove the plan, approve 
the plan based on the information submitted, or approve the plan with a 
specific condition that certain specified activities are not authorized 
and shall not be conducted until additional information is obtained and 
submitted for evaluation, and the Director gives specific approval to 
proceed with those activities.



Sec. 280.7  Obligations of persons.

    (a) Activities authorized under a prospecting or scientific research 
permit issued under this part or research authorized pursuant to the 
provisions of Sec. 280.5(c) of this part shall be conducted so as not to 
create conditions which will pose an unreasonable risk of--
    (1) Interference with, or endangerment of, operations under any 
lease or permit issued or maintained pursuant to the Act;
    (2) Serious, irreparable, or immediate harm or damage to life 
(including fish and other aquatic life) or to the marine, coastal, or 
human environment;
    (3) Serious, irreparable, or immediate harm or damage to property or 
to any mineral (in areas leased or not leased);
    (4) Pollution;
    (5) Disturbance of archaeological resources;
    (6) Hazardous or unsafe conditions; or
    (7) Interference with or serious, irreparable, or immediate harm to 
other uses of the area.
    (b) The permittee or scientific researcher shall allow the Director 
to be present on any cruise.
    (c) The permittee shall notify and obtain the prior approval of the 
Director before a substantial change from the approved plan is 
initiated.



Sec. 280.8  Reporting.

    (a) The permittee shall submit a status report to the Director 
within 30 days of the close of each calendar quarter or more frequently 
if requested by the Director. The report shall include a summary of the 
prospecting or scientific research activities conducted prior to the end 
of the reporting period and the results obtained. The last quarterly 
report may be combined with the final report if the final report is 
submitted within 30 days after the end of the last quarter in which 
permitted activity occurs. Each permittee shall submit to the Director a 
final report of activities conducted under the permit within 6 months 
after expiration of the permit or after the completion of prospecting or 
scientific research activities, or 60 days prior to a planned lease 
offering when prospecting or scientific research activities are within 
the planned leasing area, whichever is sooner, provided that no report 
shall be required less than 30 days after completion of permitted 
activities. The report shall include--
    (1) A description of the work performed;
    (2) Charts, maps, or plats depicting the area and blocks in which 
any activities were conducted specifically, identifying the lines of 
geophysical traverses and/or the locations where geological activity was 
conducted;
    (3) The dates on which the actual activities were performed;
    (4) A narrative summary of any mineral occurrences encountered 
including location, environmental features, and

[[Page 463]]

the nature and degree of adverse effects, if any, of the permitted 
activities on the environment, aquatic life, archaeological resources, 
or other uses of the area in which the activities were conducted;
    (5) A report of the results of the environmental monitoring required 
in Sec. 280.6(a)(8) of this part; and
    (6) Such other descriptions of the activities conducted as may be 
specified by the Director.
    (b) All persons shall immediately notify the Director of all serious 
accidents, any death or serious injury, or fire or explosion connected 
with any activity conducted pursuant to this part.



Sec. 280.9   Recordkeeping.

    (a) Any permittee who acquires rock and mineral samples under a 
permit shall keep for 1 year after submittal of the final report a 
representative split of each geological sample and a quarter 
longitudinal segment of each core which shall be available for 
inspection at the convenience of the Director who may cut such core and 
geological samples for retention by MMS.
    (b) Any permittee who acquires G&G data and information under a 
permit shall keep the data and information available for 3 years after 
submittal of the final report. The data and information shall be 
available for inspection and copying at a location within the 
appropriate OCS Region or at another location approved by the Director. 
The records shall include environmental data and information; G&G data 
and information; drill logs; analyses of cores, cuttings, and samples; 
and maps and navigation tapes showing the location where samples were 
taken and test drilling conducted.



Sec. 280.10   Environmental effects.

    The potential of proposed prospecting or scientific research 
activities for adverse impact on the environment will be evaluated by 
MMS to determine the need for mitigation measures. The MMS anticipates 
that activities of the type listed below typically will not cause 
significant environmental impact and, in accordance with 516 DM 6, 
Appendix 10 to the Departmental Manual, will normally be categorically 
excluded from additional environmental analysis. The types of activities 
include--
    (a) Gravity and magnetometric observations and measurements;
    (b) Bottom and subbottom acoustic profiling or imaging without the 
use of explosives;
    (c) Mineral sampling of a limited nature such as that using either 
test drillholes or cores to less than 300 feet below the seafloor;
    (d) Water and biotic sampling, if the sampling does not adversely 
affect shellfish beds, marine mammals, or an endangered species or if 
permitted by the National Marine Fisheries Service or another Federal 
Agency;
    (e) Meteorological observations and measurements, including the 
setting of instruments;
    (f) Hydrographic and oceanographic observations and measurements, 
including the setting of instruments;
    (g) Sampling by box core or grab sampler to determine seabed 
geological or geotechnical properties;
    (h) Television and still photographic observation and measurements;
    (i) Shipboard mineral assaying and analysis; and
    (j) Placement of positioning systems, including bottom transponders 
and surface and subsurface buoys reported in Notices to Mariners.



Sec. 280.11   Notification.

    (a) The Governor(s) of adjacent State(s) shall be notified by the 
Director with a copy of the application for a permit with the 
accompanying plan immediately upon the submission of an application for 
approval.
    (b) In cases where an environmental assessment is to be prepared, 
the Director will invite the Governor(s) of adjacent States(s) to review 
and provide comments regarding the proposed activities. The Director's 
invitation to provide comments shall allow the Governor a specified 
period of time to comment.
    (c) The Director shall notify Federal Agencies, as appropriate, with 
a copy of the application for a permit with the accompanying plan 
immediately upon the submission of the application for approval.

[[Page 464]]



Sec. 280.12  Disclosure of information to the public.

    (a) The Director shall make data, information, and samples available 
in accordance with the requirements and subject to the limitations of 
the Act, the Freedom of Information Act (5 U.S.C. 552), and the 
implementing regulations.
    (b) For geological data, information, and samples and geophysical 
information submitted under a permit and retained by MMS, the Director 
shall make such data, information, and samples available to the public 
25 years after the date of submission of the data and information or 
such earlier time as may be agreed to by the permittee who provides the 
data or information. Geophysical data submitted under a permit and 
retained by MMS shall be made available to the public by the Director 50 
years after the date of submission to MMS unless an earlier date is 
agreed to by the permittee who submits the data.
    (c) The Director reserves the right to disclose any data, 
information, or samples submitted by a permittee to an independent 
contractor or agent for the purpose of reproducing, processing, 
reprocessing, or interpreting the data or information. Such contractor 
or agent shall be subject to the same limitations on disclosure of data, 
information, and samples as those applicable to the Director under 
paragraph (b) of this section.



Sec. 280.13  Disclosure of data and information to the adjacent States.

    (a) Proprietary data, information, and samples submitted to MMS by 
permittees shall be made available to adjacent State(s) upon request by 
the Governor(s) in accordance with paragraphs (b), (c), and (d) of this 
section.
    (b) Disclosure shall occur only after the Governor has entered into 
an agreement with the Secretary providing that--
    (1) The confidentiality of the information shall be maintained;
    (2) In any action commenced against the Federal Government or the 
State for the failure to protect the confidentiality of proprietary 
information, the Federal Government or the State, as the case may be, 
may not raise as a defense any claim of sovereign immunity or any claim 
that the employee who revealed the proprietary information, which is the 
basis of the suit, was acting outside the scope of the person's 
employment in revealing the information;
    (3) The State agrees to hold the United States harmless for any 
violation by the State or its employees or contractors of the agreement 
to protect the confidentiality of proprietary data and information and 
samples; and
    (4) The materials containing the proprietary data, information, and 
samples shall remain the property of the United States.
    (c) The data, information, and samples available to the State(s) 
pursuant to an agreement shall be related to leased lands.
    (d) The materials containing the proprietary data, information, and 
samples shall be returned to MMS when they are no longer needed by the 
State or when requested by the Director.



Sec. 280.14  Suspension or temporary prohibition of activities.

    The Director may suspend or temporarily prohibit the conduct of G&G 
prospecting or scientific research activities by notifying the person 
conducting the activity, either orally or in writing, when the Director 
determines that there is a threat of serious, irreparable, or immediate 
harm or damage to life (including fish and other aquatic life), 
property, any mineral (in areas leased or not leased), the national 
security or defense, or the marine, coastal, or human environment; or 
there is a failure to comply with a provision of the Act or of any 
applicable law, the provisions of the permit, or provisions of these and 
other applicable regulations. Such suspension or temporary prohibition 
shall be effective immediately upon receipt of the notice. Suspensions 
or temporary prohibitions issued orally shall be followed by a written 
notice confirming the action, and all written notices will be sent by 
certified or registered mail. A suspension or temporary prohibition 
shall remain in effect until the basis for the suspension or temporary 
prohibition has been corrected to the satisfaction of the Director.

[[Page 465]]



Sec. 280.15  Cancellation or relinquishment.

    The Director may cancel or a permittee may relinquish, in whole or 
in part, a permit to conduct prospecting or scientific research 
activities at any time by sending a notice of cancellation or a notice 
of relinquishment. Such notices shall state the reason for the 
cancellation or relinquishment and shall be sent by certified or 
registered mail to the other party at least 30 days in advance of the 
date that the cancellation or relinquishment will be effective.



Sec. 280.16  Remedies and penalties.

    Persons conducting activities in the OCS pursuant to this part shall 
be subject to the remedies and penalties provisions of section 24 of the 
Act and the applicable civil penalty procedures contained in part 250 of 
this title for noncompliance with any provision of the Act, permit, 
regulation, or order issued under the Act. The remedies or penalties 
prescribed in this section shall be in addition to any other penalty 
afforded by any other law or regulation.



Sec. 280.17  Appeals.

    Orders or decisions issued under the regulations in this part may be 
appealed as provided in part 290 of this title.



PART 281--LEASING OF MINERALS OTHER THAN OIL, GAS, AND SULPHUR IN THE OUTER CONTINENTAL SHELF--Table of Contents




                           Subpart A--General

Sec.
281.0  Authority for information collection.
281.1  Purpose and applicability.
281.2  Authority.
281.3  Definitions.
281.4  Qualifications of lessees.
281.5  False statements.
281.6  Appeals.
281.7  Disclosure of information to the public.
281.8  Rights to minerals.
281.9  Jurisdictional controversies.

                      Subpart B--Leasing Procedures

281.11  Unsolicited request for a lease sale.
281.12  Request for OCS mineral information and interest.
281.13  Joint State/Federal coordination.
281.14  OCS mining area identification.
281.15  Tract size.
281.16  Proposed leasing notice.
281.17  Leasing notice.
281.18  Bidding system.
281.19  Lease term.
281.20  Submission of bids.
281.21  Award of leases.
281.22  Lease form.
281.23  Effective date of leases.

                   Subpart C--Financial Considerations

281.26  Payments.
281.27  Annual rental.
281.28  Royalty.
281.29  Royalty valuation.
281.30  Minimum royalty.
281.31  Overriding royalties.
281.32  Waiver, suspension, or reduction of rental, minimum royalty, or 
          production royalty.
281.33  Bonds and bonding requirements.

               Subpart D--Assignments and Lease Extensions

281.40  Assignment of leases or interests therein.
281.41  Requirements for filing for transfers.
281.42  Effect of assignment on particular lease.
281.43  Effect of suspensions on lease term.

                    Subpart E--Termination of Leases

281.46  Relinquishment of leases or parts of leases.
281.47  Cancellation of leases.

    Authority: 43 U.S.C. 1331 et seq.

    Source: 54 FR 2049, Jan. 18, 1989, unless otherwise noted.



                           Subpart A--General



Sec. 281.0  Authority for information collection.

    The information collection requirements contained in part 281 have 
been approved by the Office of Management and Budget under 44 U.S.C. 
3507 and assigned clearance number 1010-0082. The information is being 
collected to determine if the applicant for a lease on the Outer 
Continental Shelf (OCS) is qualified to hold such a lease or to 
determine if a requested action is warranted. The information will be 
used to make those determinations. The obligation to respond is 
mandatory.

[[Page 466]]



Sec. 281.1  Purpose and applicability.

    The purpose of these regulations is to establish procedures under 
which the Secretary of the Interior (Secretary) will exercise the 
authority granted to administer a leasing program for minerals other 
than oil, gas, and sulphur in the OCS. The rules in this part apply 
exclusively to leasing activities for minerals other than oil, gas, and 
sulphur in the OCS pursuant to the Act.



Sec. 281.2  Authority.

    The Act authorizes the Secretary to grant leases for any mineral 
other than oil, gas, and sulphur in any area of the OCS to the qualified 
persons offering the highest cash bonuses on the basis of competitive 
bidding upon such royalty, rental, and other terms and conditions as the 
Secretary may prescribe at the time of offering the area for lease (43 
U.S.C. 1337(k)). The Secretary is to administer the leasing provisions 
of the Act and prescribe the rules and regulations necessary to carry 
out those provisions (43 U.S.C. 1334(a)).



Sec. 281.3  Definitions.

    When used in this part, the following terms shall have the meaning 
given below:
    Act means the OCS Lands Act, as amended (43 U.S.C. 1331 et seq.).
    Adjacent State means with respect to any activity proposed, 
conducted, or approved under this part, any coastal State--
    (1) That is, or is proposed to be, receiving for processing, 
refining, or transshipping OCS mineral resources commercially recovered 
from the seabed;
    (2) That is used, or is scheduled to be used, as a support base for 
prospecting, exploration, testing, and mining activities; or
    (3) In which there is a reasonable probability of significant effect 
on land or water uses from such activity.
    Director means the Director of the Minerals Management Service (MMS) 
of the U.S. Department of the Interior or an official authorized to act 
on the Director's behalf.
    Governor means the Governor of a State or the person or entity 
designated by, or pursuant to, State law to exercise the powers granted 
to such Governor pursuant to the Act.
    Lease means any form of authorization which is issued under section 
8 of the Act and which authorizes exploration for, and development and 
production of, minerals, or the area covered by that authorization, 
whichever is required by the context.
    Lessee means the person authorized by a lease, or an approved 
assignment thereof, to explore for and develop and produce the leased 
deposits in accordance with the regulations in this chapter. The term 
includes all persons holding that authority by or through the lessee.
    OCS mineral means a mineral deposit or accretion found on or below 
the surface of the seabed but does not include oil, gas, sulphur; salt 
or sand and gravel intended for use in association with the development 
of oil, gas, or sulphur; or source materials essential to production of 
fissionable materials which are reserved to the United States pursuant 
to section 12(e) of the Act.
    Outer Continental Shelf means all submerged lands lying seaward and 
outside of the area of lands beneath navigable waters as defined in 
section 2 of the Submerged Lands Act (43 U.S.C. 1301) and of which the 
subsoil and seabed appertain to the United States and are subject to its 
jurisdiction and control.
    Overriding royalty means a royalty created out of the lessee's 
interest which is over and above the royalty reserved to the lessor in 
the original lease.
    Person means a citizen or national of the United States; an alien 
lawfully admitted for permanent residency in the United States as 
defined in 8 U.S.C. 1101(a)(20); a private, public, or municipal 
corporation organized under the laws of the United States or of any 
State or territory thereof; an association of such citizens, nationals, 
resident aliens or private, public, or municipal corporations, States, 
or political subdivisions of States; or anyone operating in a manner 
provided for by treaty or other applicable international agreements. The 
term does not include Federal Agencies.

[[Page 467]]

    Secretary means the Secretary of the Interior or an official 
authorized to act on the Secretary's behalf.



Sec. 281.4  Qualifications of lessees.

    (a) In accordance with section 8(k) of the Act, leases shall be 
awarded only to qualified persons offering the highest cash bonus bid.
    (b) Mineral leases issued pursuant to section 8 of the Act may be 
held only by:
    (1) Citizens and nationals of the United States;
    (2) Aliens lawfully admitted for permanent residence in the United 
States as defined in 8 U.S.C. 1101(a)(20);
    (3) Private, public, or municipal corporations organized under the 
laws of the United States or of any State or of the District of Columbia 
or territory thereof; or
    (4) Associations of such citizens, nationals, resident aliens, or 
private, public, or municipal corporations, States, or political 
subdivisions of States.



Sec. 281.5  False statements.

    Under the provisions of 18 U.S.C. 1001, it is a crime punishable by 
up to 5 years imprisonment or a fine of $10,000, or both, for anyone 
knowingly and willfully to submit or cause to be submitted to any Agency 
of the United States any false or fraudulent statement(s) to any matters 
within the Agency's jurisdiction.



Sec. 281.6  Appeals.

    Any party adversely affected by a decision of an MMS official made 
pursuant to the provisions of this part shall have the right of appeal 
pursuant to part 290 of this title, except as provided otherwise in 
Sec. 281.21 of this part.



Sec. 281.7  Disclosure of information to the public.

    The Secretary shall make data and information available to the 
public in accordance with the requirements and subject to the 
limitations of the Act, the Freedom of Information Act (5 U.S.C. 552), 
and the implementing regulations (30 CFR parts 280 and 282 and 43 CFR 
part 2).



Sec. 281.8  Rights to minerals.

    (a) Unless otherwise specified in the leasing notice, a lease for 
OCS minerals shall include rights to all minerals within the leased area 
except the following;
    (1) Minerals subject to rights granted by existing leases;
    (2) Oil;
    (3) Gas;
    (4) Sulphur;
    (5) Minerals produced in direct association with oil, gas, or 
sulphur;
    (6) Salt deposits which are identified in the leasing notice as 
being reserved;
    (7) Sand and gravel deposits which are identified in the leasing 
notice as being reserved; and
    (8) Source materials essential to production of fissionable 
materials which are reserved pursuant to section 12(a) of the Act.
    (b) When an OCS mineral lease issued uner this part limits the 
minerals to which rights are granted, such lease shall include rights to 
minerals produced in direct association with the OCS mineral specified 
in the lease but not the rights to minerals specifically reserved.
    (c) The existence of an OCS mineral, oil and gas, or sulphur lease 
shall not preclude the issuance of a lease(s) for other OCS minerals in 
the same area. However, no OCS mineral lease shall authorize or permit 
the lessee thereunder to unreasonably interfere with or endanger 
operations under an existing OCS mineral, oil and gas, or sulphur lease.



Sec. 281.9  Jurisdictional controversies.

    In the event of a controversy between the United States and a State 
as to whether certain lands are subject to Federal or State jurisdiction 
(43 U.S.C. 1336), either the Governor or the Secretary may initiate 
negotiations in an attempt to settle the jurisdictional controversy. 
With the concurrence of the Attorney General, the Secretary may enter 
into an agreement with a State with respect to OCS mineral activities 
under the Act or under State authority and to payment and impounding of 
rents, royalties, and other sums and with respect to the offering of 
lands for lease pending settlement of the controversy.

[[Page 468]]



                      Subpart B--Leasing Procedures



Sec. 281.11  Unsolicited request for a lease sale.

    (a) Any person may at any time request that OCS minerals be offered 
for lease. A request that OCS minerals be offered for lease shall be 
submitted to the Director and shall contain the following information:
    (1) The area to be offered for lease.
    (2) The OCS minerals of primary interest.
    (3) The available OCS mineral resource and environmental information 
pertaining to the area of interest to be offered for lease which 
supports the request.
    (b) Within 45 days after receipt of a request submitted under 
paragraph (a) of this section, the Director shall either initiate steps 
leading to the offer of OCS minerals for lease and notify the applicant 
of the action taken or inform the applicant of the reasons for not 
initiating steps leading to the offer of OCS minerals for lease.
    (c) Any interested party may at any time submit information to the 
Director concerning the scheduling of proposed lease sales of OCS 
minerals in any area of the OCS. Such information may include but not be 
limited to any of the following:
    (1) Benefits of conducting a lease sale in an area.
    (2) Costs of conducting a lease sale in an area.
    (3) Geohazards which could be encountered in an area.
    (4) Geological information about an area and mineral resource 
potential.
    (5) Environmental information about an area.
    (6) Information about known archaeological resources in an area.



Sec. 281.12  Request for OCS mineral information and interest.

    (a) When considering whether to offer OCS minerals for lease, the 
Secretary, upon the Department of the Interior's own initiative or as a 
result of a submission under Sec. 281.11, may request indications of 
interest in the leasing of a specific OCS mineral, a group of OCS 
minerals, or all OCS minerals in the area being considered for lease. 
Requests for information and interest shall be published in the Federal 
Register and may be published elsewhere.
    (b) States and local governments, industry, other Federal Agencies, 
and all interested parties (including the public) may respond to a 
request for information and interest. All information provided to the 
Secretary will be considered in the decision whether to proceed with 
additional steps leading to the offering of OCS minerals for lease.
    (c) The Secretary may request specific information concerning the 
offering of a specific OCS mineral, a group of OCS minerals, or all OCS 
minerals in a broad area for lease or the offering of one or more 
discrete tracts which represent a minable orebody. The Secretary's 
request may ask for comments on OCS areas which have been determined to 
warrant special consideration and analysis. Requests may be for comments 
concerning geological conditions or archaeological resources on the 
seabed; multiple uses of the area proposed for leasing, including 
navigation, recreation and fisheries; and other socioeconomic, 
biological, and environmental information relating to the area proposed 
for leasing.

[54 FR 2049, Jan. 18, 1989, as amended at 59 FR 53094, Oct. 21, 1994]



Sec. 281.13  Joint State/Federal coordination.

    (a) The Secretary may invite the adjacent State Governor(s) to join 
in, or the adjacent State Governor(s) may request that the Secretary 
join in, the establishment of a State/Federal task force or some other 
joint planning or coordination arrangement when industry interest exists 
for OCS mineral leasing or geological information appears to support the 
leasing of OCS minerals in specific areas. Participation in joint State/
Federal task forces or other arrangements will afford the adjacent State 
Governor(s) opportunity for access to available data and information 
about the area; knowledge of progress made in the leasing process and of 
the results of subsequent exploration and development activities; 
facilitate the resolution of issues of mutual interest; and provide a 
mechanism for planning, coordination, consultation, and other activities 
which the Secretary and the Governor(s) may

[[Page 469]]

identify as contributing to the leasing process.
    (b) State/Federal task forces or other such arrangement are to be 
constituted pursuant to such terms and conditions (consistent with 
Federal law and these regulations) as the Secretary and the adjacent 
State Governor(s) may agree.
    (c) State/Federal task forces or other such arrangements will 
provide a forum which the Secretary and adjacent State Governor(s) may 
use for planning, consultation, and coordination on concerns associated 
with the offering of OCS minerals other than oil, gas, or sulphur for 
lease.
    (d) With respect to the activities authorized under these 
regulations each State/Federal task force may make recommendations to 
the Secretary and adjacent State Governor(s) concerning:
    (1) The identification of areas in which OCS minerals might be 
offered for lease;
    (2) The potential for conflicts between the exploration and 
development of OCS mineral resources, other users and uses of the area, 
and means for resolution or mitigation of these conflicts;
    (3) The economic feasibility of developing OCS mineral resources in 
the area proposed for leasing;
    (4) Potential environmental problems and measures that might be 
taken to mitigate these problems;
    (5) Development of guidelines and procedures for safe, 
environmentally responsible exploration and development practices; and
    (6) Other issues of concern to the Secretary and adjacent State 
Governor(s).
    (e) State/Federal task forces or other such arrangements might also 
be used to conduct or oversee research, studies, or reports (e.g., 
Environmental Impact Statements).



Sec. 281.14  OCS mining area identification.

    The Secretary, after considering the available OCS mineral resources 
and environmental data and information, the recommendation of any joint 
State/Federal task force established pursuant to Sec. 281.13 of this 
part, and the comments received from interested parties, shall select 
the tracts to be considered for offering for lease. The selected tracts 
will be considered in the environmental analysis conducted for the 
proposed lease offering.



Sec. 281.15  Tract size.

    The size of the tracts to be offered for lease shall be as 
determined by the Secretary and specified in the leasing notice. It is 
intended that tracts offered for lease be sufficiently large to include 
potentially minable OCS mineral orebodies. When the presence of any 
minable orebody is unknown and additional prospecting is needed to 
discover and delineate OCS minerals, the size of tracts specified in the 
leasing notice may be relatively large.



Sec. 281.16  Proposed leasing notice.

    (a) Prior to offering OCS minerals in an area for lease, the 
Director shall assess the available information including 
recommendations of any joint State/Federal task force established 
pursuant to Sec. 281.13 of this part to determine lease sale procedures 
to be prescribed and to develop a proposed leasing notice which sets out 
the proposed primary term of the OCS mineral leases to be offered; lease 
stipulations including measures to mitigate potentially adverse impacts 
on the environment; and such rental, royalty, and other terms and 
conditions as the Secretary may prescribe in the leasing notice.
    (b) The proposed leasing notice shall be sent to the Governor(s) of 
any adjacent State(s), and a Notice of its availability shall be 
published in the Federal Register at least 60 days prior to the 
publication of the leasing notice.
    (c) Written comments of the adjacent State Governor(s) submitted 
within 60 days after publication of the Notice of Availability of the 
proposed leasing notice shall be considered by the Secretary.
    (d) Prior to publication of the leasing notice, the Secretary shall 
respond in writing to the comments of the adjacent State Governor(s) 
stating the reasons for accepting or rejecting the Governor's 
recommendations, or for implementing any alternative mutually acceptable 
approach identified in consultation with the Governor(s) as a means to 
provide a reasonable balance between the national interest and the

[[Page 470]]

well being of the citizens of the adjacent State.



Sec. 281.17  Leasing notice.

    (a) The Director shall publish the leasing notice in the Federal 
Register at least 30 days prior to the date that OCS minerals will be 
offered for lease. The leasing notice shall state whether oral or sealed 
bids or a combination thereof will be used; the place, date, and time at 
which sealed bids shall be filed; and the place, date, and time at which 
sealed bids shall be opened and/or oral bids received. The leasing 
notice shall contain or reference a description of the tract(s) to be 
offered for lease; specify the mineral(s) to be offered for lease (if 
less than all OCS minerals are being offered); specify the period of 
time the primary term of the lease shall cover; and any stipulation(s), 
term(s), and condition(s) of the offer to lease (43 U.S.C. 1337(k)).
    (b) The leasing notice shall contain a reference to the OCS minerals 
lease form which shall be issued to successful bidders.
    (c) The leasing notice shall specify the terms and conditions 
governing the payment of the winning bid.



Sec. 281.18  Bidding system.

    (a) The OCS minerals shall be offered by competitive, cash bonus 
bidding under terms and conditions specified in the leasing notice and 
in accordance with all applicable laws and regulations.
    (b)(1) When the leasing notice specifies the use of sealed bids, 
such bids received in response to the leasing notice shall be opened at 
the place, date, and time specified in the leasing notice. The sole 
purpose of opening bids is to publicly announce and record the bids 
received, and no bids shall be accepted or rejected at that time.
    (2) The Secretary reserves the right to reject any and all sealed 
bids received for any tract, regardless of the amount offered.
    (3) In the event the highest bids are tie bids when using sealed 
bidding procedures, the tied bidders may be permitted to submit oral 
bids to determine the highest cash bonus bidder.
    (c)(1) When the leasing notice specifies the use of oral bids, oral 
bids shall be received at the place, time, and date and in accordance 
with the procedures specified in the leasing notice.
    (2) The Secretary reserves the right to reject all oral bids 
received for any tract, regardless of the amount offered.
    (d) When the leasing notice specifies the use of deferred cash bonus 
bidding, bids shall be received in accordance with paragraph (b) or (c) 
of this section, as appropriate. The high bid will be determined based 
upon the net present value of each total bid. The appropriate discount 
rate will be specified in the leasing notice. High bidders using the 
deferred bonus option shall pay a minimum of 20 percent of the cash 
bonus bid prior to lease issuance. At least a total of 60 percent of the 
cash bonus bid shall be due on or before the 5th anniversary of the 
lease, and payment of the remainder of the cash bonus bid shall be due 
on the 10th anniversary of the lease. The lessee shall submit a bond 
guaranteeing payment of the deferred portion of the bonus, in accordance 
with Sec. 281.33.



Sec. 281.19  Lease term.

    An OCS mineral lease for OCS minerals other than sand and gravel 
shall be for a primary term of not less than 20 years as stipulated in 
the leasing notice. The primary lease term for each OCS mineral shall be 
determined based on exploration and development requirements for the OCS 
minerals being offered by the Secretary. An OCS mineral lease for sand 
and gravel shall be for a primary term of 10 years unless otherwise 
stipulated in the leasing notice. A lease will continue beyond the 
specified primary term for so long thereafter as leased OCS minerals are 
being produced in accordance with an approved mining operation or the 
lessee is otherwise in compliance with provisions of the lease and the 
regulations in this chapter under which a lessee can earn continuance of 
the OCS mineral lease in effect.



Sec. 281.20  Submission of bids.

    (a) If the bidder is an individual, a statement of citizenship shall 
accompany the bid.

[[Page 471]]

    (b) If the bidder is an association (including a partnership), the 
bid shall be accompanied by a certified statement indicating the State 
in which it is registered and that the association is authorized to hold 
mineral leases on the OCS, or appropriate reference to statements or 
records previously submitted to an MMS OCS office (including material 
submitted in compliance with prior regulations).
    (c) If the bidder is a corporation, the bid shall be accompanied by 
the following information:
    (1) Either a statement certified by the corporate Secretary or 
Assistant Secretary over the corporate seal showing the State in which 
it was incorporated and that it is authorized to hold mineral leases on 
the OCS or appropriate reference to statements or record previously 
submitted to an MMS OCS office (including material submitted in 
compliance with prior regulations).
    (2) Evidence of authority of persons signing to bind the 
corporation. Such evidence may be in the form of a certified copy of 
either the minutes of the board of directors or of the bylaws indicating 
that the person signing has authority to do so, or a certificate to that 
effect signed by the Secretary or Assistant Secretary of the corporation 
over the corporate seal, or appropriate reference to statements or 
records previously submitted to an MMS OCS office (including material 
submitted in compliance with prior regulations). Bidders are advised to 
keep their filings current.
    (3) The bid shall be executed in conformance with corporate 
requirements.
    (d) Bidders should be aware of the provisions of 18 U.S.C. 1860, 
which prohibits unlawful combination or intimidation of bidders.
    (e) When sealed bidding is specified in the leasing notice, a 
separate sealed bid shall be submitted for each bid unit that is bid 
upon as described in the leasing notice. A bid may not be submitted for 
less than a bidding unit identified in the leasing notice.
    (f) When oral bidding is specified in the leasing notice, 
information which must accompany a bid pursuant to paragraph (a), (b), 
or (c) of this section, shall be presented to MMS at the lease sale 
prior to the offering of an oral bid.



Sec. 281.21  Award of leases.

    (a)(1) The decision of the Director on bids shall be the final 
action of the Department, subject only to reconsideration by the 
Secretary, pursuant to a written request in accordance with paragraph 
(a)(2) of this section. The delegation of review authority to the Office 
of Hearings and Appeals shall not be applicable to decisions on high 
bids for leases in the OCS.
    (2) Any bidder whose bid is rejected by the Director may file a 
written request for reconsideration with the Secretary within 15 days of 
notice of rejection, accompanied by a statement of reasons with a copy 
to the Director. The Secretary shall respond in writing either affirming 
or reversing the decision.
    (b) Written notice of the Director's action in accepting or 
rejecting bids shall be transmitted promptly to those bidders whose 
deposits have been held. If a bid is accepted, such notice shall 
transmit three copies of the lease form to the successful bidder. As 
provided in Sec. 281.26 of this part, the bidder shall, not later than 
the 10th business day after receipt of the lease, execute the lease, pay 
the first year's rental, and unless payment of a portion of the bid is 
deferred, pay the balance of the bonus bid. When payment of a portion of 
the bid is deferred, the successful bidder shall also file a bond to 
guarantee payment of the deferred portion as required in Sec. 281.33. 
Deposits shall be refunded on high bids subsequently rejected. When 
three copies of the lease have been executed by the successful bidder 
and returned to the Director, the lease shall be executed on behalf of 
the United States; and one fully executed copy shall be transmitted to 
the successful bidder.
    (c) If the successful bidder fails to execute the lease within the 
prescribed time or to otherwise comply with the applicable regulations, 
the successful bidder's deposit shall be forfeited and disposed of in 
the same manner as other receipts under the Act.
    (d) If, before the lease is executed on behalf of the United States, 
the land which would be subject to the lease is

[[Page 472]]

withdrawn or restricted from leasing, the deposit shall be refunded.
    (e) If the awarded lease is executed by an agent acting on behalf of 
the bidder, the bidder shall submit with the executed lease, evidence 
that the agent is authorized to act on behalf of the bidder.



Sec. 281.22  Lease form.

    The OCS mineral leases shall be issued on the lease form prescribed 
by the Secretary in the leasing notice.



Sec. 281.23  Effective date of leases.

    Leases issued under the regulations in this part shall be dated and 
become effective as of the first day of the month following the date 
leases are signed on behalf of the lessor except that, upon written 
request, a lease may be dated and become effective as of the first day 
of the month within which it is signed on behalf of the lessor.



                   Subpart C--Financial Considerations



Sec. 281.26  Payments.

    (a) For sealed bids, a bonus bid deposit of a specified percentage 
of the total amount bid is required to be submitted with the bid. The 
percentage of bonus bid required to be deposited will be specified in 
the leasing notice. The remittance may be made in cash or by Federal 
Reserve check, commerical check, bank draft, money order, certified 
check, or cashier's check made payable to ``Department of the Interior--
MMS.'' Payment of this portion of the bonus bid may not be made by 
Electronic Funds Transfer.
    (b) For oral bids, a bonus bid deposit of a specified percentage of 
the total amount bid must be submitted to the official designated in the 
leasing notice following the completion of the oral bidding. The 
percentage of bonus bid required to be deposited will be specified in 
the leasing notice. Payment of this portion of the bonus bid shall be 
made by Electronic Fund Transfer within the timeframe specified in the 
leasing notice.
    (c) The deposit received from high bidders will be placed in a 
Treasury account pending acceptance or rejection of the bid. Other bids 
submitted under paragraph (a) of this section will be returned to the 
bidders. If the high bid is subsequently rejected, an amount equal to 
that deposited with the high bid will be returned according to 
applicable regulations.
    (d) The balance of the winning bonus bid and all rentals and 
royalties must be paid in accordance with the terms and conditions of 
this part, the Leasing Notice, and Subchapter A of this chapter.
    (e) For each lease issued pursuant to this subpart, there shall be 
one person identified who shall be solely responsible for all payments 
due and payable under the provisions of the lease. The single 
responsible person shall be designated as the payor for the lease and 
shall be so identified on the Solid Minerals Payor Information Form 
(MMS-4030) in accordance with Sec. 210.201 of this title. The designated 
person shall be responsible for all bonus, rental, and royalty payments.
    (f) Royalty shall be computed at the rate specified in the leasing 
notice, and paid in value unless the Secretary elects to have the 
royalty delivered in kind.
    (g) For leases which provide for minimum royalty payments, each 
lessee shall pay the minimum royalty specified in the lease at the end 
of each lease year beginning with the lease year in which production 
royalty is paid (whether the full amount specified in the lease or \1/2\ 
the amount specified in the lease pursuant to Sec. 281.28(b) on this 
part) of OCS minerals produced (sold, transferred, used, or otherwise 
disposed of) from the leasehold.
    (h) Unless stated otherwise in the lease, product valuation will be 
in accordance with the regulations of this chapter. The value used in 
the computation of royalty shall be determined by the Director. The 
value, for royalty purposes, shall be the gross proceeds received by the 
lessee for produced substances at the point the product is produced and 
placed in its first marketable condition, consistent with prevailing 
practices in the industry. In establishing the value, the Director shall 
consider, in this order: (1) The price received by the lessee; (2) 
commodity and spot market transactions; (3) any other

[[Page 473]]

valuation method proposed by the lessee and approved by the Director; 
and (4) value or cost netback. For non-arm's length transactions, the 
first benchmark will only be accepted if it is not less than the second 
benchmark.
    (i) All payors must submit payments and payment information forms 
and maintain auditable records in accordance with the following Royalty 
Management regulations of this title:

Section 210.200--Required recordkeeping.
Section 210.201--Solid minerals payor information form.
Section 210.202--Report of sales and royalty remittance--solid minerals.
Section 210.203--Special forms and reports.
Section 212.200--Maintenance of and access to records.
Section 217.250--Audits.
Section 218.40--Assessments for incorrect or late reports and failure to 
          report.
Section 218.50--Timing of payment.
Section 218.51--Method of payment.
Section 218.52--Designated payor.
Section 218.56--Definitions.
Section 218.150--Royalties, net profit shares, and rental payments.
Section 218.151--Rentals.
Section 218.155--Method of payment.
Section 218.202--Late payment or underpayment charges.
Section 241.20--Civil penalties authorized by statutes other than the 
          Federal Oil and Gas Royalty Management Act of 1982.



Sec. 281.27  Annual rental.

    (a) The annual lease rental shall be due and payable in accordance 
with the provisions of this section. No rental shall be due or payable 
under a lease commencing with the first lease anniversary date following 
the commencement of royalty payments on leasehold production computed on 
the basis of the royalty rate specified in the lease except that annual 
rental shall be due for any year in which production from the leasehold 
is not subject to royalty pursuant to Sec. 281.28.
    (b) Unless otherwise specified in the leasing notice and 
subsequently issued lease, no annual rental payment shall be due during 
the first 5 years in the life of a lease.
    (c) The leasee shall pay an annual rental in the amount specified in 
the leasing notice and subsequently issued lease not later than the last 
day prior to the commencement of the rental year.
    (d) A rental adjustment schedule and amount may be specified in a 
leasing notice and subsequently issued lease when a variance is 
warranted by geologic, geographic, technical, or economic conditions.



Sec. 281.28  Royalty.

    (a) The royalty due the lessor on OCS minerals produced (i.e., sold, 
transferred, used, or otherwise disposed of) from a lease shall be set 
out in a separate schedule attached to and made a part of each lease and 
shall be as specified in the leasing notice. The royalty due on 
production shall be based on a percentage of the value or amount of the 
OCS mineral(s) produced, a sum assessed per unit of product, or other 
such method as the Secretary may prescribe in the leasing notice. When 
the royalty specified is a sum assessed per unit of product, the amount 
of the royalty shall be subject to an annual adjustment based on changes 
in the appropriate price index, when specified in the leasing notice. 
When the royalty is specified as a percentage of the value or amount of 
the OCS minerals produced, the Secretary will notify the lessee when and 
where royalty is to be delivered in kind.
    (b) When prescribed in the leasing notice and subsequently issued 
lease, royalty due on OCS minerals produced from a leasehold will be 
reduced for up to any 5 consecutive years, as specified by the lessee 
prior to the commencement of production, during the 1st through 15th 
year in the life of the lease. No royalty shall be due in any year of 
the specified 5-year period that occurs during the 1st through 10th 
years in the life of the lease, and a royalty of one-half the amount 
specified in the lease shall be due in any year of the specified 5-year 
period that occurs in the 11th through 15th year in the life of the 
lease. The lessee shall pay the amount specified in the lease rental for 
any royalty free year. The minimum royalty specified in the lease shall 
apply during any year of reduced royalty.



Sec. 281.29  Royalty valuation.

    The method of valuing the product from a leasehold shall be in 
accordance with regulations of this chapter and

[[Page 474]]

procedures prescribed in the leasing notice and subsequently issued 
lease.



Sec. 281.30  Minimum royalty.

    Unless otherwise specified in the leasing notice, each lease issued 
pursuant to the regulations in this part shall require the payment of a 
specified minimum annual royalty beginning with the year in which OCS 
minerals are produced (sold, transferred, used, or otherwise disposed 
of) from the leasehold except that the annual rentals shall apply during 
any year that royalty free production is in effect pursuant to 
Sec. 281.28(b). Minimum royalty payments shall be offset by royalty paid 
on production during the lease year. Minimum royalty payments are due at 
the beginning of the lease year and payable by the end of the month 
following the end of the lease year for which they are due.



Sec. 281.31  Overriding royalties.

    (a) Subject to the approval of the Secretary, an overriding royalty 
interest may be created by an assignment pursuant to section 8(e) of the 
Act. The Secretary may deny approval of an assignment which creates an 
overriding royalty on a lease whenever that denial is determined to be 
in the interest of conservation, necessary to prevent premature 
abandonment of a producing mine, or to make possible the mining of 
economically marginal or low-grade ore deposits. In any case, the total 
of applicable overriding royalties may not exceed 2.5 percent or one-
half the base royalty due the Federal Government, whichever is less.
    (b) No transfer or agreement may be made which creates an overriding 
royalty interest unless the owner of that interest files an agreement in 
writing that such interest is subject to the limitations provided in 
Sec. 281.30 of this part, paragraph (a) of this section, and Sec. 281.32 
of this part.



Sec. 281.32  Waiver, suspension, or reduction of rental, minimum royalty or production royalty.

    (a) The Secretary may waive, suspend, or reduce the rental, minimum 
royalty, and/or production royalty prescribed in a lease for a specified 
time period when the Secretary determines that it is in the national 
interest, it will result in the conservation of natural resources of the 
OCS, it will promote development, or the mine cannot be successfully 
operated under existing conditions.
    (b) An application for waiver, suspension, or reduction of rental, 
minimum royalty, or production royalty under paragraph (a) of this 
section shall be filed in duplicate with the Director. The application 
shall contain the serial number(s) of the lease(s), the name of the 
lessee(s) of record, and the operator(s) if applicable. The application 
shall either:
    (1)(i) Show the location and extent of all mining operations and a 
tabulated statement of the minerals mined and subject to royalty for 
each of the last 12 months immediately prior to filing the application:
    (ii) Contain a detailed statement of expenses and costs of operating 
the lease, the income from the sale of any lease products, and the 
amount of all overriding royalties and payments out of production paid 
to others than the United States; and
    (iii) All facts showing whether or not the mine(s) can be 
successfully operated under the royalty fixed in the lease; or
    (2) If no production has occurred from the lease, show that the 
lease cannot be successfully operated under the rental, royalty, and 
other conditions specified in the lease.
    (c) The applicant for a waiver, suspension, or reduction under this 
section shall file documentation that the lessee and the royalty holders 
agree to a reduction of all other royalties from the lease so that the 
aggregate of all other royalties does not exceed one-half the amount of 
the reduced royalties that would be paid to the United States.



Sec. 281.33  Bonds and bonding requirements.

    (a) When the leasing notice specifies that payment of a portion of 
the bonus bid can be deferred, the lessee shall be required to submit a 
surety or personal bond to guarantee payment of a deferred portion of 
the bid. Upon the payment of the full amount of the cash

[[Page 475]]

bonus bid, the lessee's bond will be released.
    (b) All bonds to guarantee payment of the deferred portion of the 
high cash bonus bid furnished by the lessee must be in a form or on a 
form approved by the Associate Director for Offshore Minerals 
Management. A single copy of the required form is to be executed by the 
principal or, in the case of surety bonds, by both the principal and an 
acceptable surety.
    (1) Only those surety bonds issued by qualified surety companies 
approved by the Department of the Treasury shall be accepted. (See 
Department of the Treasury Circular No. 570 and any supplemental or 
replacement circulars.)
    (2) Personal bonds shall be accompanied by a cashier's check, 
certified check, or negotiable U.S. Treasury bonds of an equal value to 
the amount specified in the bond. Negotiable Treasury bonds shall be 
accompanied by a proper conveyance of full authority to the Director to 
sell such securities in case of default in the performance of the terms 
and conditions of the lease.
    (c) Prior to the commencement of any activity on a lease(s), the 
lessee shall submit a surety or personal bond as described in 
Sec. 282.40 of this title. Prior to the approval of a Delineation, 
Testing, or Mining Plan, the bond amount shall be adjusted, if 
appropriate, to cover the operations and activities described in the 
proposed plan.

[54 FR 2049, Jan. 18, 1989, as amended at 62 FR 27960, May 22, 1997]

    Effective Date Note: At 62 FR 27960, May 22, 1997, Sec. 281.33 was 
amended by revising the first sentence of the introductory text of 
paragraph (b), effective Aug. 20, 1997. For the convenience of the user, 
the superseded text is set forth as follows:

Sec. 281.33  Bonds and bonding requirements.

                                * * * * *

    (b) All bonds to guarantee payment of the deferred portion of the 
high cash bonus bid furnished by a lessee shall be in a form or on a 
form approved by the Director.* * *

                                * * * * *



               Subpart D--Assignments and Lease Extensions



Sec. 281.40  Assignment of leases or interests therein.

    (a) Subject to the approval of the Secretary, a lease may be 
assigned, in whole or in part, pursuant to section 8(e) of the Act to 
anyone qualified to hold a lease.
    (b) Any approved assignment shall be deemed to be effective on the 
first day of the lease month following the date that it is submitted to 
the Director for approval unless by written request the parties request 
that the effective date be the first of the month in which the Director 
approves the assignment.
    (c) The assignor shall be liable for all obligations under the lease 
occurring prior to the effective date of an assignment.
    (d) The assignee shall be liable for all obligations under the lease 
occurring on or after the effective date of an assignment and shall 
comply with all terms and conditions of the lease and applicable 
regulations issued under the Act.



Sec. 281.41  Requirements for filing for transfers.

    (a)(1) All instruments of transfer of a lease or of an interest 
therein including subleases and assignments of record interest shall be 
filed in triplicate for approval within 90 days from the date of final 
execution. They shall include a statement over the transferee's own 
signature with respect to citizenship and qualifications similar to that 
required of a lessee and shall contain all of the terms and conditions 
agreed upon by the parties thereto.
    (2) An application for approval of any instrument required to be 
filed shall not be accepted unless accompanied by a nonrefundable fee of 
$50. Any document not required to be filed by these regulations but 
submitted for record purposes shall be accompanied by a nonrefundable 
fee of $50 per lease affected. Such documents may be rejected at the 
discretion of the authorized officer.
    (b) An attorney in fact signing on behalf of the holder of a lease 
or sublease, shall furnish evidence of authority to execute the 
assignment or application

[[Page 476]]

for approval and the statement required by Sec. 281.20 of this part.
    (c) Where an assignment creates separate leases, a bond shall be 
furnished for each of the resulting leases in the amount prescribed in 
Sec. 282.40 of this title. Where an assignment does not create separate 
leases, the assignee, if the assignment so provides and the surety 
consents, may become a joint principal on the bond with the assignor.
    (d) An heir or devisee of a deceased holder of a lease or any 
interest therein shall be recognized as the lawful successor to such 
lease or interest if evidence of status as an heir or devisee is 
furnished in the form of:
    (1) A certified copy of an appropriate order or decree of the court 
having jurisdiction over the distribution of the estate, or
    (2) If no court action is necessary, the statement of two 
disinterested persons having knowledge of the fact or a certified copy 
of the will.
    (e) The heirs or devisee shall file statements that they are the 
persons named as successors to the estate with evidence of their 
qualifications to hold such lease or interest therein.
    (f) In the event an heir or devisee is unable to qualify to hold the 
lease or interest, the heir or devisee shall be recognized as the lawful 
successor of the deceased and be entitled to hold the lease for a period 
not to exceed 2 years from the date of death of the predecessor in 
interest.
    (g) Each obligation under any lease and under the regulations in 
this part shall inure to the heirs, executors, administrators, 
successors, or assignees of the lease.



Sec. 281.42  Effect of assignment on particular lease.

    (a) When an assignment is made of all the record title to a portion 
of the acreage in a lease, the assigned and retained portions of the 
lease area become segregated into separate and distinct leases. In such 
a case, the assignee becomes a lessee of the Government as to the 
segregated tract that is the subject of the assignment and is bound by 
the terms of the lease as though the lease had been obtained from the 
United States in the assignee's own name, and the assignment, after its 
approval, shall be the basis of a new record. Royalty, minimum royalty, 
and annual rental provisions of the lease shall apply separately to each 
segregated portion.
    (b) Each lease of an OCS mineral created by the segregation of a 
lease under paragraph (a) of this section shall continue in full force 
and effect for the remainder of the primary term of the original lease 
and so long thereafter as minerals are produced from the portion of the 
lease created by segregation in accordance with operations approved by 
the Director or the lessee is otherwise in compliance with provisions of 
the lease or regulations for earning the continuation of the lease in 
effect.



Sec. 281.43  Effect of suspensions on lease term.

    (a) If the Director orders the suspension of either operations or 
production, or both, with respect to any lease in its primary term, the 
primary term of the lease shall be extended by a period of time 
equivalent to the period of the directed suspension.
    (b) If the Director orders or approves the suspension of either 
operations or production, or both, with respect to any lease that is in 
force beyond its primary term, the term of the lease shall not be deemed 
to expire so long as the suspension remains in effect.



                    Subpart E--Termination of Leases



Sec. 281.46  Relinquishment of leases or parts of leases.

    (a) A lease or any part thereof may be surrendered by the record 
title holder by filing a written relinquishment with the Director. A 
relinquishment shall take effect on the date it is filed subject to the 
continued obligation of the lessee and the surety to:
    (1) Make all payments due, including any accrued rentals and 
royalties; and
    (2) Abandon all operations, remove all facilities, and clear the 
land to be relinquished to the satisfaction of the Director.
    (b) Upon relinquishment of a lease, the data and information 
submitted under the lease will no longer be held confidential and will 
be available to the public.

[[Page 477]]



Sec. 281.47  Cancellation of leases.

    (a) Whenever the owner of a nonproducing lease fails to comply with 
any of the provisions of the Act, the lease, or the regulations issued 
under the Act, and the default continues for a period of 30 days after 
mailing of notice by registered or certified letter to the lease owner 
at the owner's record post office address, the Secretary may cancel the 
lease pursuant to section 5(c) of the Act, and the lessee shall not be 
entitled to compensation. Any such cancellation is subject to judicial 
review as provided by section 23(b) of the Act.
    (b) Whenever the owner of any producing lease fails to comply with 
any of the provisions of the Act, the lease, or the regulations issued 
under the Act, the Secretary may cancel the lease only after judicial 
proceedings pursuant to section 5(d) of the Act, and the lessee shall 
not be entitled to compensation.
    (c) Any lease issued under the Act, whether producing or not, may be 
canceled by the Secretary upon proof that it was obtained by fraud or 
misrepresentation and after notice and opportunity to be heard has been 
afforded to the lessee.
    (d) The Secretary may cancel a lease in accordance with the 
following:
    (1) Cancellation may occur at any time if the Secretary determines 
after a hearing that:
    (i) Continued activity pursuant to such lease would probably cause 
serious harm or damage to life (including fish and other aquatic life), 
to property, to any mineral (in areas leased or not leased), to the 
national security or defense, or to the marine, coastal, or human 
environment;
    (ii) The threat of harm or damage will not disappear or decrease to 
an acceptable extent within a reasonable period of time; and
    (iii) The advantages of cancellation outweigh the advantages of 
continuing such lease in force;
    (2) Cancellation shall not occur unless and until operations under 
such lease shall have been under suspension or temporary prohibition by 
the Secretary, with due extension of any lease term continuously for a 
period of 5 years, or for a lesser period upon request of the lessee; 
and
    (3) Cancellation shall entitle the lessee to receive such 
compensation as is shown to the Secretary as being equal to the lesser 
of:
    (i) The fair value of the canceled rights as of the date of 
cancellation, taking into account both anticipated revenues from the 
lease and anticipated costs, including costs of compliance with all 
applicable regulations and operating orders, liability for cleanup costs 
or damages, or both, and all other costs reasonably anticipated on the 
lease, or
    (ii) The excess, if any, over the lessee's revenues from the lease 
(plus interest thereon from the date of receipt to date of 
reimbursement) of all consideration paid for the lease and all direct 
expenditures made by the lessee after the date of issuance of such lease 
and in connection with exploration or development, or both, pursuant to 
the lease (plus interest on such consideration and such expenditures 
from date of payment to date of reimbursement), except that in the case 
of joint leases which are canceled due to the failure of one or more 
partners to exercise due diligence, the innocent parties shall have the 
right to seek damages for such loss from the responsible party or 
parties and the right to acquire the interests of the negligent party or 
parties and be issued the lease in question.
    (iii) The lessee shall not be entitled to compensation where one of 
the following circumstances exists when a lease is canceled:
    (A) A producing lease is forfeited or is canceled pursuant to 
section (5)(d) of the Act;
    (B) A Testing Plan or Mining Plan is disapproved because of the 
lessee's failure to demonstrate compliance with the requirements of 
applicable Federal Law; or
    (C) The lessee(s) of a nonproducing lease fails to comply with a 
provision of the Act, the lease, or regulations issued under the Act, 
and the noncompliance continues for a period of 30 days or more after 
the mailing of a notice of noncompliance by registered or certified 
letter to the lessee(s).

[[Page 478]]



PART 282--OPERATIONS IN THE OUTER CONTINENTAL SHELF FOR MINERALS OTHER THAN OIL, GAS, AND SULPHUR--Table of Contents




                           Subpart A--General

Sec.
282.0  Authority for information collection.
282.1  Purpose and authority.
282.2  Scope.
282.3  Definitions.
282.4  Opportunities for review and comment.
282.5  Disclosure of data and information to the public.
282.6  Disclosure of data and information to an adjacent State.
282.7  Jurisdictional controversies.

        Subpart B--Jurisdiction and Responsibilities of Director

282.10  Jurisdiction and responsibilities of Director.
282.11  Director's authority.
282.12  Director's responsibilities.
282.13  Suspension of production or other operations.
282.14  Noncompliance, remedies, and penalties.
282.15  Cancellation of leases.

         Subpart C--Obligations and Responsibilities of Lessees

282.20  Obligations and responsibilities of lessees.
282.21  Plans, general.
282.22  Delineation Plan.
282.23  Testing Plan.
282.24  Mining Plan.
282.25  Plan Modification.
282.26  Contingency Plan.
282.27  Conduct of operations.
282.28  Environmental protection measures.
282.29  Reports and records.
282.30  Right of use and easement.
282.31  Suspension of production or other operations.

                           Subpart D--Payments

282.40  Bonds.
282.41  Methods of royalty calculation.
282.42  Payments.

                           Subpart E--Appeals

282.50  Appeals.
    Authority: 43 U.S.C. 1331 et seq.
    Source: 54 FR 2067, Jan. 18, 1989, unless otherwise noted.



                           Subpart A--General



Sec. 282.0  Authority for information collection.

    The information collection requirements in this part have been 
approved by the Office of Management and Budget under 44 U.S.C. 3507 and 
assigned clearance number 1010-0081. The information is being collected 
to inform the Minerals Management Service (MMS) of general mining 
operations in the Outer Continental Shalf (OCS). The information will be 
used to ensure that operations are conducted in a safe and 
environmentally responsible manner in compliance with governing laws and 
regulations. The requirement to respond is mandatory.



Sec. 282.1  Purpose and authority.

    (a) The Act authorizes the Secretary to prescribe such rules and 
regulations as may be necessary to carry out the provisions of the Act 
(43 U.S.C. 1334). The Secretary is authorized to prescribe and amend 
regulations that the Secretary determines to be necessary and proper in 
order to provide for the prevention of waste, conservation of the 
natural resources of the OCS, and the protection of correlative rights 
therein. In the enforcement of safety, environmental, and conservation 
laws and regulations, the Secretary is authorized to cooperate with 
adjacent States and other Departments and Agencies of the Federal 
Government.
    (b) Subject to the supervisory authority of the Secretary, and 
unless otherwise specified, the regulations in this part shall be 
administered by the Director of the MMS.



Sec. 282.2  Scope.

    The rules and regulations in this part apply as of their effective 
date to all operations conducted under a mineral lease for OCS minerals 
other than oil, gas, or sulphur issued under the provisions of section 
8(k) of the Act.



Sec. 282.3  Definitions.

    When used in this part, the following terms shall have the meaning 
given below:
    Act means the OCS Lands Act, as amended (43 U.S.C. 1331 et seq.).

[[Page 479]]

    Adjacent State means with respect to any activity proposed, 
conducted, or approved under this part, any coastal State--
    (1) That is, or is proposed to be, receiving for processing, 
refining, or transshipment OCS mineral resources commercially recovered 
from the seabed;
    (2) That is used, or is scheduled to be used, as a support base for 
prospecting, exploration, testing, or mining activities; or
    (3) In which there is a reasonable probability of significant effect 
on land or water uses from such activity.
    Contingency Plan means a plan for action to be taken in emergency 
situations.
    Data means geological and geophysical (G&G) facts and statistics or 
samples which have not been analyzed, processed, or interpreted.
    Development means those activities which take place following the 
discovery of minerals in paying quantities including geophysical 
activities, drilling, construction of offshore facilities, and operation 
of all onshore support facilities, which are for the purpose of 
ultimately producing the minerals discovered.
    Director means the Director of MMS of the U.S. Department of the 
Interior or an official authorized to act on the Director's behalf.
    Exploration means the process of searching for minerals on a lease 
including:
    (1) Geophysical surveys where magnetic, gravity, seismic, or other 
systems are used to detect or imply the presence of minerals;
    (2) Any drilling including the drilling of a borehole in which the 
discovery of a mineral other than oil, gas, or sulphur is made and the 
drilling of any additional boreholes needed to delineate any mineral 
deposits; and
    (3) The taking of sample portions of a mineral deposit to enable the 
lessee to determine whether to proceed with development and production.
    Geological sample means a collected portion of the seabed, the 
subseabed, or the overylying waters (when obtained for geochemical 
analysis) acquired while conducting postlease mining activities.
    Governor means the Governor of a State or the person or entity 
designated by, or pursuant to, State law to exercise the power granted 
to a Governor.
    Information means G&G data that have been analyzed, processed, or 
interpreted.
    Lease means one of the following, whichever is required by the 
context: Any form of authorization which is issued under section 8 or 
maintained under section 6 of the Acts and which authorizes exploration 
for, and development and production of, specific minerals; or the area 
covered by that authorization.
    Lessee means the person authorized by a lease, or an approved 
assignment thereof, to explore for and develop and produce the leased 
deposits in accordance with the regulations in this chapter. The term 
includes all parties holding that authority by or through the lessee.
    Major Federal action means any action or proposal by the Secretary 
which is subject to the provisions of section 102(2)(C) of the National 
Environmental Policy Act (NEPA) (i.e., an action which will have a 
significant impact on the quality of the human environment requiring 
preparation of an Environmental Impact Statement (EIS) pursuant to 
section 102(2)(C) of NEPA).
    Marine environment means the physical, atmospheric, and biological 
components, conditions, and factors which interactively determine the 
productivity, state, condition, and quality of the marine ecosystem, 
including the waters of the high seas, the contiguous zone, transitional 
and intertidal areas, salt marshes, and wetlands within the coastal zone 
and on the OCS.
    Minerals includes oil, gas, sulphur, geopressured-geothermal and 
associated resources, and all other minerals which are authorized by an 
Act of Congress to be produced from ``public lands'' as defined in 
section 103 of the Federal Land Policy and Management Act of 1976.
    OCS mineral means any mineral deposit or accretion found on or below 
the surface of the seabed but does not include oil, gas, or sulphur; 
salt or sand

[[Page 480]]

and gravel intended for use in association with the development of oil, 
gas, or sulphur; or source materials essential to production of 
fissionable materials which are reserved to the United States pursuant 
to section 12(e) of the Act.
    Operator means the individual, partnership, firm, or corporation 
having control or management of operations on the lease or a portion 
thereof. The operator may be a lessee, designated agent of the lessee, 
or holder of rights under an approved operating agreement.
    Outer Continental Shelf means all submerged lands lying seaward and 
outside of the area of lands beneath navigable waters as defined in 
section 2 of Submerged Lands Act (43 U.S.C. 1301) and of which the 
subsoil and seabed appertain to the United States and are subject to its 
jurisdiction and control.
    Person means a citizen or national of the United States; an alien 
lawfully admitted for permanent residency in the United States as 
defined in 8 U.S.C. 1101(a)(20); a private, public, or municipal 
corporation organized under the laws of the United States or of any 
State or territory thereof; an association of such citizens, nationals, 
resident aliens or private, public, or municipal corporations, States, 
or political subdivisions of States; or anyone operating in a manner 
provided for by treaty or other applicable international agreements. The 
term does not include Federal Agencies.
    Secretary means the Secretary of the Interior or an official 
authorized to act on the Secretary's behalf.
    Testing means removing bulk samples for processing tests and 
feasibility studies and/or the testing of mining equipment to obtain 
information needed to develop a detailed Mining Plan.



Sec. 282.4  Opportunities for review and comment.

    (a) In carrying out MMS's responsibilities under the Act and 
regulations in this part, the Director shall provide opportunities for 
Governors of adjacent States, State/Federal task forces, lessees and 
operators, other Federal Agencies, and other interested parties to 
review proposed activities described in a Delineation, Testing, or 
Mining Plan together with an analysis of potential impacts on the 
environment and to provide comments and recommendations for the 
disposition of the proposed plan.
    (b)(1) For Delineation Plans, the adjacent State Governor(s) shall 
be notified by the Director within 15 days following the submission of a 
request for approval of a Delineation Plan. Notification shall include a 
copy of the proposed Delineation Plan and the accompanying environmental 
information. The adjacent State Governor(s) who wishes to comment on a 
proposed Delineation Plan may do so within 30 days of the receipt of the 
proposed plan and the accompanying information.
    (2) In cases where an Environmental Assessment is to be prepared, 
the Director's invitation to provide comments may allow the adjacent 
State Governor(s) more than 30 days following receipt of the proposed 
plan to provide comments.
    (3) The Director shall notify Federal Agencies, as appropriate, with 
a copy of the proposed Delineation Plan and the accompanying 
environmental information within 15 days following the submission of the 
request. Agencies that wish to comment on a proposed Delineation Plan 
shall do so within 30 days following receipt of the plan and the 
accompanying information.
    (c)(1) For Testing Plans, the adjacent State Governor(s) shall be 
notified by the Director within 20 days following submission of a 
request for approval of a proposed Testing Plan. Notification shall 
include a copy of the proposed Testing Plan and the accompanying 
environmental information. The adjacent State Governor(s) who wishes to 
comment on a proposed Testing Plan may do so within 60 days of the 
receipt of a plan and the accompanying information.
    (2) In cases where an EIS is to be prepared, the Director's 
invitation to provide comments may allow the adjacent State Governor(s) 
more than 60 days following receipt of the proposed plan to provide 
comments.
    (3) The Director shall notify Federal Agencies, as appropriate, with 
a copy of the proposed Testing Plan and the

[[Page 481]]

accompanying environmental information within 20 days following the 
submission of the request. Agencies that wish to comment on a proposed 
Testing Plan shall do so within 60 days following receipt of the plan 
and the accompanying information.
    (d)(1) For Mining Plans, the adjacent State Governor(s) shall be 
notified by the Director within 20 days following the submission of a 
request for approval of a proposed Mining Plan. Notification shall 
include a copy of the proposed Mining Plan and the accompanying 
environmental information. The adjacent State Governor(s) who wishes to 
comment on a proposed Mining Plan may do so within 60 days of the 
receipt of a plan and the accompanying information.
    (2) In cases where an EIS is to be prepared, the Director's 
invitation to provide comments may allow the adjacent State Governor(s) 
more than 60 days following receipt of the proposed plan to provide 
comments.
    (3) The Director shall notify Federal Agencies, as appropriate, with 
a copy of the proposed Mining Plan and the accompanying environmental 
information within 20 days following the submission of the request. 
Agencies that wish to comment on a proposed Mining Plan shall do so 
within 60 days following receipt of the plan and the accompanying 
information.
    (e) When an adjacent State Governor(s) has provided comments 
pursuant to paragraphs (b), (c), and (d) of this section, the 
Governor(s) shall be given, in writing, a list of recommendations which 
are adopted and the reasons for rejecting any of the recommendations of 
the Governor(s) or for implementing any alternative means identified 
during consultations with the Governor(s).



Sec. 282.5  Disclosure of data and information to the public.

    (a) The Director shall make data, information, and samples available 
in accordance with the requirements and subject to the limitations of 
the Act, the Freedom of Information Act (5 U.S.C. 552), and the 
implementing regulations (43 CFR part 2).
    (b) Geophysical data, processed G&G information, interpreted G&G 
information, and other data and information submitted pursuant to the 
requirements of this part shall not be available for public inspection 
without the consent of the lessee so long as the lease remains in 
effect, unless the Director determines that earlier limited release of 
such information is necessary for the unitization of operations on two 
or more leases, to ensure proper Mining Plans for a common orebody, or 
to promote operational safety. When the Director determines that early 
limited release of data and information is necessary, the data and 
information shall be shown only to persons with a direct interest in the 
affected lease(s), unitization agreement, or joint Mining Plan.
    (c) Geophysical data, processed geophysical information and 
interpreted geophysical information collected on a lease with high 
resolution systems (including, but not limited to, bathymetry, side-scan 
sonar, subbottom profiler, and magnetometer) in compliance with 
stipulations or orders concerning protection of environmental aspects of 
the lease may be made available to the public 60 days after submittal to 
the Director, unless the lessee can demonstrate to the satisfaction of 
the Director that release of the information or data would unduly damage 
the lessee's competitive position.



Sec. 282.6  Disclosure of data and information to an adjacent State.

    (a) Proprietary data, information, and samples submitted to MMS 
pursuant to the requirements of this part shall be made available for 
inspection by representatives of adjacent State(s) upon request by the 
Governor(s) in accordance with paragraphs (b), (c), and (d) of this 
section.
    (b) Disclosure shall occur only after the Governor has entered into 
an agreement with the Secretary providing that:
    (1) The confidentiality of the information shall be maintained;
    (2) In any action commenced against the Federal Government or the 
State for failure to protect the confidentiality of proprietary 
information, the Federal Government or the State, as the case may be, 
may not raise as a defense any claim of sovereign immunity

[[Page 482]]

or any claim that the employee who revealed the proprietary information, 
which is the basis of the suit, was acting outside the scope of the 
person's employment in revealing the information;
    (3) The State agrees to hold the United States harmless for any 
violation by the State or its employees or contractors of the agreement 
to protect the confidentiality of proprietary data, information, and 
samples; and
    (c) The data, information, and samples available for inspection by 
representatives of adjacent State(s) pursuant to an agreement shall be 
related to leased lands.



Sec. 282.7  Jurisdictional controversies.

    In the event of a controversy between the United States and a State 
as to whether certain lands are subject to Federal or State 
jurisdiction, either the Governor of the State or the Secretary may 
initiate negotiations in an attempt to settle the jurisdictional 
controversy. With the concurrence of the Attorney General, the Secretary 
may enter into an agreement with a State with respect to OCS mineral 
activities and to payment and impounding of rents, royalties, and other 
sums and with respect to the issuance or nonissuance of new leases 
pending settlement of the controversy.



        Subpart B--Jurisdiction and Responsibilities of Director



Sec. 282.10  Jurisdiction and responsibilities of Director.

    Subject to the authority of the Secretary, the following activities 
are subject to the regulations in this part and are under the 
jurisdiction of the Director: Exploration, testing, and mining 
operations together with the associated environmental protection 
measures needed to permit those activities to be conducted in an 
environmentally responsible manner; handling, measurement, and 
transportation of OCS minerals; and other operations and activities 
conducted pursuant to a lease issued under part 281 of this chapter, or 
pursuant to a right of use and easement granted under this part, by or 
on behalf of a lessee or the holder of a right of use and easement.



Sec. 282.11  Director's authority.

    (a) In the exercise of jurisdiction under Sec. 282.10, the Director 
is authorized and directed to act upon the requests, applications, and 
notices submitted under the regulations in this part; to issue either 
written or oral orders to govern lease operations; and to require 
compliance with applicable laws, regulations, and lease terms so that 
all operations conform to sound conservation practices and are conducted 
in a manner which is consistent with the following:
    (1) Make such OCS minerals available to meet the nation's needs in a 
timely manner;
    (2) Balance OCS mineral resource development with protection of the 
human, marine, and coastal environments;
    (3) Ensure the public a fair and equitable return on OCS minerals 
leased on the OCS; and
    (4) Foster and encourage private enterprise.
    (b)(1) The Director is to be provided ready access to all OCS 
mineral resource data and all environmental data acquired by the lessee 
or holder of a right of use and easement in the course of operations on 
a lease or right of use and easement and may require a lessee or holder 
to obtain additional environmental data when deemed necessary to assure 
adequate protection of the human, marine, and coastal environments.
    (2) The Director is to be provided an opportunity to inspect, cut, 
and remove representative portions of all samples acquired by a lessee 
in the course of operations on the lease.
    (c) In addition to the rights and privileges granted to a lessee 
under any lease issued or maintained under the Act, on request, the 
Director may grant a lessee, subject to such conditions as the Director 
may prescribe, a right of use and easement to construct and maintain 
platforms, artificial islands, and/or other installations and devices 
which are permanently or temporarily attached to the seabed and which 
are needed for the conduct of leasehold exploration, testing, 
development, production, and processing activities or other leasehold 
related operations whether on or off the lease.

[[Page 483]]

    (d)(1) The Director may approve the consolidation of two or more OCS 
mineral leases or portions of two or more OCS mineral leases into a 
single mining unit requested by lessees, or the Director may require 
such consolidation when the operation of those leases or portions of 
leases as a single mining unit is in the interest of conservation of the 
natural resources of the OCS or the prevention of waste. A mining unit 
may also include all or portions of one or more OCS mineral leases with 
all or portions of one or more adjacent State leases for minerals in a 
common orebody. A single unit operator shall be responsible for 
submission of required Delineation, Testing, and Mining Plans covering 
OCS mineral operations for an approved mining unit.
    (2) Operations such as exploration, testing, and mining activities 
conducted in accordance with an approved plan on any lease or portion of 
a lease which is subject to an approved mining unit shall be considered 
operations on each of the leases that is made subject to the approved 
mining unit.
    (3) Minimum royalty paid pursuant to a Federal lease, which is 
subject to an approved mining unit, is creditable against the production 
royalties allocated to that Federal lease during the lease year for 
which the minimum royalty is paid.
    (4) Any OCS minerals produced from State and Federal leases which 
are subject to an approved mining unit shall be accounted for separately 
unless a method of allocating production between State and Federal 
leases has been approved by the Director and the appropriate State 
official.



Sec. 282.12  Director's responsibilities.

    (a) The Director is responsible for the regulation of activities to 
assure that all operations conducted under a lease or right of use and 
easement are conducted in a manner that protects the environment and 
promotes orderly development of OCS mineral resources. Those activities 
are to be designed to prevent serious harm or damage to, or waste of, 
any natural resource (including OCS mineral deposits and oil, gas, and 
sulphur resources in areas leased or not leased), any life (including 
fish and other aquatic life), property, or the marine, coastal, or human 
environment.
    (b)(1) In the evaluation of a Delineation Plan, the Director shall 
consider whether the plan is consistent with:
    (i) The provisions of the lease;
    (ii) The provisions of the Act;
    (iii) The provisions of the regulations prescribed under the Act;
    (iv) Other applicable Federal law; and
    (v) Requirements for the protection of the environment, health, and 
safety.
    (2) Within 30 days following the completion of an environmental 
assessment or other NEPA document prepared pursuant to the regulations 
implementing NEPA or within 30 days following the comment period 
provided in Sec. 282.4(b) of this part, the Director shall:
    (i) Approve any Delineation Plan which is consistent with the 
criteria in paragraph (b)(1) of this section;
    (ii) Require the lessee to modify any Delineation Plan that is 
inconsistent with the criteria in paragraph (b)(1) of this section; or
    (iii) Disapprove a Delineation Plan when it is determined that an 
activity proposed in the plan would probably cause serious harm or 
damage to life (including fish and other aquatic life); to property; to 
natural resources of the OCS including mineral deposits (in areas leased 
or not leased); or to the marine, coastal, or human environment, and the 
proposed activity cannot be modified to avoid the conditions.
    (3) The Director shall notify the lessee in writing of the reasons 
for disapproving a Delineation Plan or for requiring modification of a 
plan and the conditions that must be met for plan approval.
    (c)(1) In the evaluation of a Testing Plan, the Director shall 
consider whether the plan is consistent with:
    (i) The provisions of the lease;
    (ii) The provisions of the Act;
    (iii) The provisions of the regulations prescribed under the Act;
    (iv) Other applicable Federal law;
    (v) Environmental, safety, and health requirements; and
    (vi) The statutory requirement to protect property, natural 
resources of the OCS, including mineral deposits (in areas leased or not 
leased), and the national security or defense.

[[Page 484]]

    (2) Within 60 days following the release of a final EIS prepared 
pursuant to NEPA or within 60 days following the comment period provided 
in Sec. 282.4(c) of this part, the Director shall:
    (i) Approve any Testing Plan which is consistent with the criteria 
in paragraph (c)(1) of this section;
    (ii) Require the lessee to modify any Testing Plan which is 
inconsistent with the criteria in paragraph (c)(1) of this section; or
    (iii) Disapprove any Testing Plan when the Director determines the 
existence of exceptional geological conditions in the lease area, 
exceptional resource values in the marine or coastal environment, or 
other exceptional circumstances and that (A) implementation of the 
activities described in the plan would probably cause serious harm and 
damage to life (including fish and other aquatic life), to property, to 
any mineral deposit (in areas leased or not leased), to the national 
security or defense, or to the marine, coastal, or human environments; 
(B) that the threat of harm or damage will not disappear or decrease to 
an acceptable extent within a reasonable period of time; and (C) the 
advantages of disapproving the Testing Plan outweigh the advantages of 
development and production of the OCS mineral resources.
    (3) The Director shall notify the lessee in writing of the reason(s) 
for disapproving a Testing Plan or for requiring modification of a 
Testing Plan and the conditions that must be met for approval of the 
plan.
    (d)(1) In the evaluation of a Mining Plan, the Director shall 
consider whether the plan is consistent with:
    (i) The provisions of the lease;
    (ii) The provisions of the Act;
    (iii) The provisions of the regulations prescribed under the Act;
    (iv) Other applicable Federal law;
    (v) Environmental, safety, and health requirements; and
    (vi) The statutory requirements to protect property, natural 
resources of the OCS, including mineral deposits (in areas leased or not 
leased), and the national security or defense.
    (2) Within 60 days following the release of a final EIS prepared 
pursuant to NEPA or within 60 days following the comment period provided 
in Sec. 282.4(d) of this part, the Director shall:
    (i) Approve any Mining Plan which is consistent with the criteria in 
paragraph (d)(1) of this section;
    (ii) Require the lessee to modify any Mining Plan which is 
inconsistent with the criteria in paragraph (d)(1) of this section; or
    (iii) Disapprove any Mining Plan when the Director determines the 
existence of exceptional geological conditions in the lease area, 
exceptional resource values in the marine or coastal environment, or 
other exceptional circumstances, and that--
    (A) Implementation of the activities described in the plan would 
probably cause serious harm and damage to life (including fish and other 
aquatic life), to property, to any mineral deposit (in areas leased or 
not leased), to the national security or defense, or to the marine, 
coastal, or human environments;
    (B) That the threat of harm or damage will not disappear or decrease 
to an acceptable extent within a reasonable period of time; and
    (C) The advantages of disapproving the Mining Plan outweigh the 
advantages of development and production of the OCS mineral resources.
    (3) The Director shall notify the lessee in writing of the reason(s) 
for disapproving a Mining Plan or for requiring modification of a Mining 
Plan and the conditions that must be met for approval of the plan.
    (e) The Director shall assure that a scheduled onsite compliance 
inspection of each facility which is subject to regulations in this part 
is conducted at least once a year. The inspection shall be to determine 
that the lessee is in compliance with the requirements of the law; 
provisions of the lease; the approved Delineation, Testing, or Mining 
Plan; and the regulations in this part. Additional unscheduled onsite 
inspections shall be conducted without advance notice to the lessee to 
assure compliance with the provisions of applicable law; the lease; the 
approved Delineation, Testing, or Mining Plan; and the regulations in 
this part.

[[Page 485]]

    (f)(1) The Director shall, after completion of the technical and 
environmental evaluations, approve, disapprove, or require modification 
of the lessee's requests, applications, plans, and notices submitted 
pursuant to the provisions of this part; issue orders to govern lease 
operations; and require compliance with applicable provisions of the 
law, the regulations, the lease, and the approved Delineation, Testing, 
or Mining Plans. The Director may give oral orders or approvals whenever 
prior approval is required before the commencement of an operation or 
activity. Oral orders or approvals given in response to a written 
request shall be confirmed in writing within 3 working days after 
issuance of the order or granting of the oral approval.
    (2) The Director shall, after completion of the technical and 
environmental evaluations, approve, disapprove, or require modification, 
as appropriate, of the design plan, fabrication plan, and installation 
plan for platforms, artificial islands, and other installations and 
devices permanently or temporarily attached to the seabed. The approval, 
disapproval, or requirement to modify such plans may take the form of a 
condition of granting a right of use and easement under paragraph (a) of 
this section or as authorized under any lease issued or maintained under 
the Act.
    (g) The Director shall establish practices and procedures to govern 
the collection of all rents, royalties, and other payments due the 
Federal Government in accordance with terms of the leasing notice, the 
lease, and the applicable Royalty Management regulations listed in 
Sec. 281.26(i) of this chapter.
    (h) The Director may prescribe or approve, in writing or orally, 
departures from the operating requirements of the regulations of this 
part when such departures are necessary to facilitate the proper 
development of a lease; to conserve natural resources; or to protect 
life (including fish and other aquatic life), property, or the marine, 
coastal, or human environment.



Sec. 282.13  Suspension of production or other operations.

    (a) The Director may direct the suspension or temporary prohibition 
of production or any other operation or activity on all or any part of a 
lease when it has been determined that such suspension or temporary 
prohibition is in the national interest to:
    (1) Facilitate proper development of a lease including a reasonable 
time to develop a mine and construct necessary support facilities, or
    (2) Allow for the construction or negotiation for use of 
transportation facilities.
    (b) The Director may also direct or, at the request of the lessee, 
approve a suspension or temporary prohibition of production or any other 
operation or activity, if:
    (1) The lessee failed to comply with a provision of applicable law, 
regulation, order, or the lease;
    (2) There is a threat of serious, irreparable, or immediate harm or 
damage to life (including fish and other aquatic life), property, any 
mineral deposit, or the marine, coastal, or human environment;
    (3) The suspension or temporary prohibition is in the interest of 
national security or defense;
    (4) The suspension or temporary prohibition is necessary for the 
initiation and conduct of an environmental evaluation to define 
mitigation measures to avoid or minimize adverse environmental impacts.
    (5) The suspension or temporary prohibition is necessary to 
facilitate the installation of equipment necessary for safety of 
operations and protection of the environment;
    (6) The suspension or temporary prohibition is necessary to allow 
for undue delays encountered by the lessee in obtaining required permits 
or consents, including administrative or judicial challenges or appeals;
    (7) The Director determines that continued operations would result 
in premature abandonment of a producing mine, resulting in the loss of 
otherwise recoverable OCS minerals;
    (8) The Director determines that the lessee cannot successfully 
operate a producing mine due to market conditions that are either 
temporary in nature or require temporary shutdown and reinvestment in 
order for the lessee to adapt to the conditions; or

[[Page 486]]

    (9) The suspension or temporary prohibition is necessary to comply 
with judicial decrees prohibiting production or any other operation or 
activity, or the permitting of those activities, effective the date set 
by the court for that prohibition.
    (c) When the Director orders or approves a suspension or a temporary 
prohibition of operation or activity including production on all of a 
lease pursuant to paragraph (a) or (b) of this section, the term of the 
lease shall be extended for a period of time equal to the period of time 
that the suspension or temporary prohibition is in effect, except that 
no lease shall be so extended when the suspension or temporary 
prohibition is the result of the lessee's gross negligence or willful 
violation of a provision of the lease or governing regulations.
    (d) The Director may, at any time within the period prescribed for a 
suspension or temporary prohibition issued pursuant to paragraph (b)(2) 
of this section, require the lessee to submit a Delineation, Testing, or 
Mining Plan for approval in accordance with the requirements for the 
approval of such plans in this part.
    (e)(1) When the Director orders or issues a suspension or a 
temporary prohibition pursuant to paragraph (b)(2) of this section, the 
Director may require the lessee to conduct site-specific studies to 
identify and evaluate the cause(s) of the hazard(s) generating the 
suspension or temporary prohibition, the potential for damage from the 
hazard(s), and the measures available for mitigating the hazard(s). The 
nature, scope, and content of any study shall be subject to approval by 
the Director. The lessee shall furnish copies and all results of any 
such study to the Director. The cost of the study shall be borne by the 
lessee unless the Director arranges for the cost of the study to be 
borne by a party other than the lessee. The Director shall make results 
of any such study available to interested parties and to the public as 
soon as practicable after the completion of the study and submission of 
the results thereof.
    (2) When the Director determines that measures are necessary, on the 
basis of the results of the studies conducted in accordance with 
paragraph (e)(1) of this section and other information available to and 
identified by the Director, the lessee shall be required to take 
appropriate measures to mitigate, avoid, or minimize the damage or 
potential damage on which the suspension or temporary prohibition is 
based. When deemed appropriate by the Director, the lessee shall submit 
a revised Delineation, Testing, or Mining Plan to incorporate the 
mitigation measures required by the Director. In choosing between 
alternative mitigation measures, the Director shall balance the cost of 
the required measures against the reduction or potential reduction in 
damage or threat of damage or harm to life (including fish and other 
aquatic life), to property, to any mineral deposits (in areas leased or 
not leased), to the national security or defense, or to the marine, 
coastal, or human environment.
    (f)(1) If under the provisions of paragraphs (b) (2), (3), and (4) 
of this section, the Director, with respect to any lease, directs the 
suspension of production or other operations on the entire leasehold, no 
payment of rental or minimum royalty shall be due for or during the 
period of the directed suspension and the time for the lessee specify 
royalty free period of a period of reduced royalty pursuant to 
Sec. 281.28(b) of this subchapter will be extended for the period of 
directed suspension. If under the provisions of paragraphs (b) (2), (3), 
and (4) of this section the Director, with respect to a lease on which 
there has been no production, directs the suspension of operations on 
the entire leasehold, no payment of rental shall be due during the 
period of the directed suspension.
    (2) If under the provisions of this section, the Director grants the 
request of a lessee for a suspension of production or other operations, 
the lessee's obligations to pay rental, minimum royalty, or royalty 
shall continue to apply during the period of the approved suspension, 
unless the Director's approval of the lessee's request for suspension 
authorizes the payment of a lesser amount during the period of approved 
suspension. If under the provision of

[[Page 487]]

this section, the Director grants a lessee's request for a suspension of 
production or other operations for a lease which includes provisions for 
a time period which the lessee may specify during which production from 
the leasehold would be royalty free or subject to a reduced royalty 
obligation pursuant to Sec. 281.28(b) of this subchapter, the time 
during which production from a leasehold may be royalty free or subject 
to a reduced royalty obligation shall not be extended unless the 
Director's approval of the suspension specifies otherwise.
    (3) If the lease anniversary date falls within a period of 
suspension for which no rental or minimum royalty payments are required 
under paragraph (a) of this section, the prorated rentals or minimum 
royalties are due and payable as of the date the suspension period 
terminates. These amounts shall be computed and notice thereof given the 
lessee. The lessee shall pay the amount due within 30 days after receipt 
of such notice. The anniversary date of a lease shall not change by 
reason of any period of lease suspension or rental or royalty relief 
resulting therefrom.



Sec. 282.14  Noncompliance, remedies, and penalties.

    (a)(1) If the Director determines that a lessee has failed to comply 
with applicable provisions of law; the regulations in this part; other 
applicable regulations; the lease; the approved Delineation, Testing, or 
Mining Plan; or the Director's orders or instructions, and the Director 
determines that such noncompliance poses a threat of immediate, serious, 
or irreparable damage to the environment, the mine or the deposit being 
mined, or other valuable mineral deposits or other resources, the 
Director shall order the lessee to take immediate and appropriate 
remedial action to alleviate the threat. Any oral orders shall be 
followed up by service of a notice of noncompliance upon the lessee by 
delivery in person to the lessee or agent, or by certified or registered 
mail addressed to the lessee at the last known address.
    (2) If the Director determines that the lessee has failed to comply 
with applicable provisions of law; the regulations in this part; other 
applicable regulations; the lease; the requirements of an approved 
Delineation, Testing, or Mining Plan; or the Director's orders or 
instructions, and such noncompliance does not pose a threat of 
immediate, serious, or irreparable damage to the environment, the mine 
or the deposit being mined, or other valuable mineral deposits or other 
resources, the Director shall serve a notice of noncompliance upon the 
lessee by delivery in person to the lessee or agent or by certified or 
registered mail addressed to the lessee at the last known address.
    (b) A notice of noncompliance shall specify in what respect(s) the 
lessee has failed to comply with the provisions of applicable law; 
regulations; the lease; the requirements of an approved Delineation, 
Testing, or Mining Plan; or the Director's orders or instructions, and 
shall specify the action(s) which must be taken to correct the 
noncompliance and the time limits within which such action must be 
taken.
    (c) Failure of a lessee to take the actions specified in the notice 
of noncompliance within the time limit specified shall be grounds for a 
suspension of operations and other appropriate actions, including but 
not limited to the assessment of a civil penalty of up to $10,000 per 
day for each violation that is not corrected within the time period 
specified (43 U.S.C. 1350(b)).
    (d) Whenever the Director determines that a violation of or failure 
to comply with any provision of the Act; or any provision of a lease, 
license, or permit issued pursuant to the Act; or any provision of any 
regulation promulgated under the Act probably occurred and that such 
apparent violation continued beyond notice of the violation and the 
expiration of the reasonable time period allowed for corrective action, 
the Director shall follow the procedures concerning remedies and 
penalties in subpart N, Remedies and Penalties, of part 250 of this 
title to determine and assess an appropriate penalty.
    (e) The remedies and penalties prescribed in this section shall be 
concurrent and cumulative, and the exercise of one shall not preclude 
the exercise of the other. Further, the remedies and

[[Page 488]]

penalties prescribed in this section shall be in addition to any other 
remedies and penalties afforded by any other law or regulation (43 
U.S.C. 1350(e)).



Sec. 282.15  Cancellation of leases.

    (a) Whenever the owner of a nonproducing lease fails to comply with 
any of the provisions of the Act, the lease, or the regulations issued 
under the Act, and the default continues for a period of 30 days after 
mailing of notice by registered or certified letter to the lease owner 
at the owner's record post office address, the Secretary may cancel the 
lease pursuant to section 5(c) of the Act, and the lessee shall not be 
entitled to compensation. Any such cancellation is subject to judicial 
review as provided by section 23(b) of the Act.
    (b) Whenever the owner of any producing lease fails to comply with 
any of the provisions of the Act, the lease, or the regulations issued 
under the Act, the Secretary may cancel the lease only after judicial 
proceedings pursuant to section 5(d) of the Act, and the lessee shall 
not be entitled to compensation.
    (c) Any lease issued under the Act, whether producing or not, may be 
canceled by the Secretary upon proof that it was obtained by fraud or 
misrepresentation and after notice and opportunity to be heard has been 
afforded to the lessee.
    (d) The Secretary may cancel a lease in accordance with the 
following:
    (1) Cancellation may occur at any time if the Secretary determines 
after a hearing that--
    (i) Continued activity pursuant to such lease would probably cause 
serious harm or damage to life (including fish and other aquatic life), 
to property, to any mineral (in areas leased or not leased), to the 
national security or defense, or to the marine, coastal, or human 
environment;
    (ii) The threat of harm or damage will not disappear or decrease to 
an acceptable extent within a reasonable period of time; and
    (iii) The advantages of cancellation outweigh the advantages of 
continuing such lease in force.
    (2) Cancellation shall not occur unless and until operations under 
such lease shall have been under suspension or temporary prohibition by 
the Secretary, with due extension of any lease term continuously for a 
period of 5 years or for a lesser period upon request of the lessee;
    (3) Cancellation shall entitle the lessee to receive such 
compensation as is shown to the Secretary as being equal to the lesser 
of--
    (i) The fair value of the canceled rights as of the date of 
cancellation, taking account of both anticipated revenues from the lease 
and anticipated costs, including costs of compliance with all applicable 
regulations and operating orders, liability for cleanup costs or 
damages, or both, and all other costs reasonably anticipated on the 
lease, or
    (ii) The excess, if any, over the lessee's revenue from the lease 
(plus interest thereon from the date of receipt to date of 
reimbursement) of all consideration paid for the lease and all direct 
expenditures made by the lessee after the date of issuance of such lease 
and in connection with exploration or development, or both, pursuant to 
the lease (plus interest on such consideration and such expenditures 
from date of payment to date of reimbursement), except that in the case 
of joint leases which are canceled due to the failure of one or more 
partners to exercise due diligence, the innocent parties shall have the 
right to seek damages for such loss from the responsible party or 
parties and the right to acquire the interests of the negligent party or 
parties and be issued the lease in question.
    (iii) The lessee shall not be entitled to compensation where one of 
the following circumstances exists when a lease is canceled:
    (A) A producing lease is forfeited or is canceled pursuant to 
section (5)(d) of the Act;
    (B) A Testing Plan or Mining Plan is disapproved because the 
lessee's failure to demonstrate compliance with the requirements of 
applicable Federal law; or
    (C) The lessee of a nonproducing lease fails to comply with a 
provision of the Act, the lease, or regulations issued under the Act, 
and the noncompliance continues for a period of 30 days or more after 
the mailing of a notice of

[[Page 489]]

noncompliance by registered or certified letter to the lessee.



         Subpart C--Obligations and Responsibilities of Lessees



Sec. 282.20  Obligations and responsibilities of lessees.

    (a) The lessee shall comply with the provisions of applicable laws; 
regulations; the lease; the requirements of the approved Delineation, 
Testing, or Mining Plans; and other written or oral orders or 
instructions issued by the Director when performing exploration, 
testing, development, and production activities pursuant to a lease 
issued under part 281 of this title. The lessee shall take all necessary 
precautions to prevent waste and damage to oil, gas, sulphur, and other 
OCS mineral-bearing formations and shall conduct operations in such 
manner that does not cause or threaten to cause harm or damage to life 
(including fish and other aquatic life); to property; to the national 
security or defense; or to the marine, coastal, or human environment 
(including onshore air quality). The lessee shall make all mineral 
resource data and information and all environmental data and information 
acquired by the lessee in the course of exploration, testing, 
development, and production operations on the lease available to the 
Director for examination and copying at the lease site or an onshore 
location convenient to the Director.
    (b) In all cases where there is more than one lease owner of record, 
one person shall be designated payor for the lease. The payor shall be 
responsible for making all rental, minimum royalty, and royalty 
payments.
    (c) In all cases where lease operations are not conducted by the 
sole lessee, a ``designation of operator'' shall be submitted to and 
accepted by the Director prior to the commencement of leasehold 
operations. This designation when accepted will be recognized as 
authority for the designee to act on behalf of the lessees and to 
fulfill the lessees' obligations under the Act, the lease, and the 
regulations of this part. All changes of address and any termination of 
a designation of operator shall be reported immediately, in writing, to 
the Director. In the case of a termination of a designation of operator 
or in the event of a controversy between the lessee and the designated 
operator, both the lessee and the designated operator will be 
responsible for the protection of the interests of the lessor.
    (d) When required by the Director or at the option of the lessee, 
the lessee shall submit to the Director the designation of a local 
representative empowered to receive notices, provide access to OCS 
mineral and environmental data and information, and comply with orders 
issued pursuant to the regulations of this part. If there is a change in 
the designated representative, the Director shall be notified 
immediately.
    (e) Before beginning operations, the lessee shall inform the 
Director in writing of any designation of a local representative under 
paragraph (d) of this section and the address of the mine office 
responsible for the exploration, testing, development, or production 
activities; the lessee's temporary and permanent addresses; or the name 
and address of the designated operator who will be responsible for the 
operations, and who will act as the local representative of the lessee. 
The Director shall also be informed of each change thereafter in the 
address of the mine office or in the name or address of the local 
representative.
    (f) The holder of a right of use and easement shall exercise its 
rights under the right of use and easement in accordance with the 
regulations of this part.
    (g) A lessee shall submit reports and maintain records in accordance 
with Sec. 282.29 of this part.
    (h) When an oral approval is given by MMS in response to an oral 
request under these regulations, the oral request shall be confirmed in 
writing by the lessee or holder of a right of use and easement within 72 
hours.
    (i) The lessee is responsible for obtaining all permits and 
approvals from MMS or other Agencies needed to carry out exploration, 
testing, development, and production activities under a lease issued 
under part 281 of this title.

[[Page 490]]



Sec. 282.21  Plans, general.

    (a) No exploration, testing, development, or production activities, 
except preliminary activities, shall be commenced or conducted on any 
lease except in accordance with a plan submitted by the lessee and 
approved by the Director. Plans will not be approved before completion 
of comprehensive technical and environmental evaluations to assure that 
the activities described will be carried out in a safe and 
environmentally responsible manner. Prior to the approval of a plan, the 
Director will assure that the lessee is prepared to take adequate 
measures to prevent waste; conserve natural resources of the OCS; and 
protect the environment, human life, and correlative rights. The lessee 
shall demonstrate to the satisfaction of the Director that the lease is 
in good standing, the lessee is authorized and capable of conducting the 
activities described in the plan, and that an acceptable bond has been 
provided.
    (b) Plans shall be submitted to the Director for approval. The 
lessee shall submit the number of copies prescribed by the Director. 
Such plans shall describe in detail the activities that are to be 
conducted and shall demonstrate that the proposed exploration, testing, 
development, and production activities will be conducted in an 
operationally safe and environmentally responsible manner that is 
consistent with the provisions of the lease, applicable laws, and 
regulations. The Governor of an affected State and other Federal 
Agencies shall be provided an opportunity to review and provide comments 
on proposed Delineation, Testing, and Mining Plans and any proposal for 
a significant modification to an approved plan. Following review, 
including the technical and environmental evaluations, the Director 
shall either approve, disapprove, or require the lessee to modify its 
proposed plan.
    (c) Lessees are not required to submit a Delineation or Testing Plan 
prior to submittal of a proposed Testing or Mining Plan if the lessee 
has sufficient data and information on which to base a Testing or Mining 
Plan without carrying out postlease exploration and/or testing 
activities. A Mining Plan may include proposed exploration or testing 
activities where those activities are needed to obtain additional data 
and information on which to base plans for future mining activities. A 
Testing Plan may include exploration activities when those activities 
are needed to obtain additional data or information on which to base 
plans for future testing or mining activities.
    (d) Preliminary activities are bathymetric, geological, geophysical, 
mapping, and other surveys necessary to develop a comprehensive 
Delineation, Testing, or Mining Plan. Such activities are those which 
have no significant adverse impact on the natural resources of the OCS. 
The lessee shall give notice to the Director at least 30 days prior to 
initiating the proposed preliminary activities on the lease. The notice 
shall describe in detail those activities that are to be conducted and 
the time schedule for conducting those activities.
    (e) Leasehold activities shall be carried out with due regard to 
conservation of resources, paying particular attention to the wise 
management of OCS mineral resources, minimizing waste of the leased 
resource(s) in mining and processing, and preventing damage to unmined 
parts of the mineral deposit and other resources of the OCS.



Sec. 282.22  Delineation Plan.

    All exploration activities shall be conducted in accordance with a 
Delineation Plan submitted by the lessee and approved by the Director. 
The Delineation Plan shall describe the proposed activities necessary to 
locate leased OCS minerals, characterize the quantity and quality of the 
minerals, and generate other information needed for the development of a 
comprehensive Testing or Mining Plan. A Delineation Plan at a minimum 
shall include the following:
    (a) The OCS mineral(s) or primary interest.
    (b) A brief narrative description of the activities to be conducted 
and how the activities will lead to the discovery and evaluation of a 
commercially minable deposit on the lease.
    (c) The name, registration, and type of equipment to be used, 
including vessel types as well as their navigation

[[Page 491]]

and mobile communication systems, and transportation corridors to be 
used between the lease and shore.
    (d) Information showing that the equipment to be used (including the 
vessel) is capable of performing the intended operation in the 
environment which will be encountered.
    (e) Maps showing the proposed locations of test drill holes, the 
anticipated depth of penetration of test drill holes, the locations 
where surficial sample were taken, and the location of proposed 
geophysical survey lines for each surveying method being employed.
    (f) A description of measures to be taken to avoid, minimize, or 
otherwise mitigate air, land, and water pollution and damage to aquatic 
and wildlife species and their habitats; any unique or special features 
in the lease area; aquifers; other natural resources of the OCS; and 
hazards to public health, safety, and navigation.
    (g) A schedule indicating the starting and completion dates for each 
proposed exploration activity.
    (h) A list of any known archaeological resources on the lease and 
measures to assure that the proposed exploration activities do not 
damage those resources.
    (i) A description of any potential conflicts with other uses and 
users of the area.
    (j) A description of measures to be taken to monitor the effects of 
the proposed exploration activities on the environment in accordance 
with Sec. 282.28(c) of this part.
    (k) A detailed description of practices and procedures to effect the 
abandonment of exploration activities, e.g., plugging of test drill 
holes. The proposed procedures shall indicate the steps to be taken to 
assure that test drill holes and other testing procedures which 
penetrate the seafloor to a significant depth are properly sealed and 
that the seafloor is left free of obstructions or structures that may 
present a hazard to other uses or users of the OCS such as navigation or 
commercial fishing.
    (l) A detailed description of the cycle of all materials, the method 
for discharge and disposal of waste and refuse, and the chemical and 
physical characteristics of waste and refuse.
    (m) A description of the potential environmental impacts of the 
proposed exploration activities including the following:
    (1) The location of associated port, transport, processing, and 
waste disposal facilities and affected environment (e.g., maps, land 
use, and layout);
    (2) A description of the nature and degree of environmental impacts 
and the domestic socioeconomic effects of construction and operation of 
the associated facilities, including waste characteristics and toxicity;
    (3) Any proposed mitigation measures to avoid or minimize adverse 
impacts on the environment;
    (4) A certificate of consistency with the federally approved State 
coastal zone management program, where applicable; and
    (5) Alternative sites and technologies considered by the lessee and 
the reasons why they were not chosen.
    (n) Any other information needed for technical evaluation of the 
planned activity, such as sample analyses to be conducted at sea, and 
the evaluation of potential environmental impacts.



Sec. 282.23  Testing Plan.

    All testing activities shall be conducted in accordance with a 
Testing Plan submitted by the lessee and approved by the Director. Where 
a lessee needs more information to develop a detailed Mining Plan than 
is obtainable under an approved Delineation Plan, to prepare feasibility 
studies, to carry out a pilot program to evaluate processing techniques 
or technology or mining equipment, or to determine environmental effects 
by a pilot test mining operation, the lessee shall submit a 
comprehensive Testing Plan for the Director's approval. Any OCS minerals 
acquired during activities conducted under an approved Testing Plan will 
be subject to the payment of royalty pursuant to the governing lease 
terms. A Testing Plan at a minimum shall include the following:
    (a) The nature and purpose of the proposed testing program.
    (b) A comprehensive description of the activities to be performed 
including descriptions of the proposed methods for analysis of samples 
taken.

[[Page 492]]

    (c) A narrative description and maps showing water depths and the 
locations of the proposed pilot mining or other testing activities.
    (d) A comprehensive description of the method and manner in which 
testing activities will be conducted and the results the lessee expects 
to obtain as a result of those activities.
    (e) The name, registration, and type of equipment to be used, 
including vessel types together with their navigation and mobile 
communication systems, and transportation corridors to be used between 
the lease and shore.
    (f) Information showing that the equipment to be used (including the 
vessel) is capable of performing the intended operation in the 
environment which will be encountered.
    (g) A schedule specifying the starting and completion dates for each 
of the testing activities.
    (h) A list of known archaeological resources on the lease and 
measures to be used to assure that the proposed testing activities do 
not damage those resources.
    (i) A description of any potential conflicts with other uses and 
users of the area.
    (j) A description of measures to be taken to avoid, minimize, or 
otherwise mitigate air, land, and water pollution and damage to aquatic 
and wildlife species and their habitat; any unique or special features 
in the lease area, other natural resources of the OCS; and hazards to 
public health, safety, and navigation.
    (k) A description of the measures to be taken to monitor the impacts 
of the proposed testing activities in accordance with Sec. 282.28(c) of 
this part.
    (l) A detailed description of the cycle of all materials including 
samples and wastes, the method for discharge and disposal of waste and 
refuse, and the chemical and physical characteristics of such waste and 
refuse.
    (m) A detailed description of practices and procedures to effect the 
abandonment of testing activities, e.g., abandonment of a pilot mining 
facility. The proposed procedures shall indicate the steps to be taken 
to assure that mined areas do not pose a threat to the environment and 
that the seafloor is left free of obstructions and structures that may 
present a hazard to other uses or users of the OCS such as navigation or 
commercial fishing.
    (n) A description of potential environmental impacts of testing 
activities including the following:
    (1) The location of associated port, transport, processing, and 
waste disposal facilities and affected environment (e.g., maps, land 
use, and layout);
    (2) A description of the nature and degree of potential 
environmental impacts of the proposed testing activities and the 
domestic socioeconomic effects of construction and operation of the 
proposed testing facilities, including waste characteristics and 
toxicity;
    (3) Any proposed mitigation measures to avoid or minimize adverse 
impacts on the environment;
    (4) A certificate of consistency with the federally approved State 
coastal zone management program, where applicable; and
    (5) Alternate sites and technologies considered by the lessee and 
the reasons why they were not selected.
    (o) Any other information needed for technical evaluation of the 
planned activities and for evaluation of the impact of those activities 
on the human, marine, and coastal environments.



Sec. 282.24  Mining Plan.

    All OCS mineral development and production activities shall be 
conducted in accordance with a Mining Plan submitted by the lessee and 
approved by the Director. A Mining Plan shall include comprehensive 
detailed descriptions, illustrations, and explanations of the proposed 
OCS mineral development, production, and processing activities and 
accurately present the lessee's proposed plan of operation. A Mining 
Plan at a minimum shall include the following:
    (a) A narrative description of the mining activities including:
    (1) The OCS mineral(s) or material(s) to be recovered;
    (2) Estimates of the number of tons and grade(s) of ore to be 
recovered;
    (3) Anticipated annual production;
    (4) Volume of ocean bottom expected to be disturbed (area and depth 
of disruption) each year; and

[[Page 493]]

    (5) All activities of the mining cycle from extraction through 
processing and waste disposal.
    (b) Maps of the lease showing water depths, the outline of the 
mineral deposit(s) to be mined with cross sections showing thickness, 
and the area(s) anticipated to be mined each year.
    (c) The name, registration, and type of equipment to be used, 
including vessel types as well as their navigation and mobile 
communication systems, and transportation corridors to be used between 
the lease and shore.
    (d) Information showing that the equipment to be used (including the 
vessel) is capable of performing the intended operation in the 
environment which will be encountered.
    (e) A description of equipment to be used in mining, processing, and 
transporting of the ore.
    (f) A schedule indicating the anticipated starting and completion 
dates for each activity described in the plan.
    (g) For onshore processing, a description of how OCS minerals are to 
be processed and how the produced OCS minerals will be weighed, assayed, 
and royalty determinations made.
    (h) For at-sea processing, additional information including type and 
size of installation or structures and the method of tailings disposal.
    (i) A list of known archaeological resources on the lease and the 
measures to be taken to assure that the proposed mining activities do 
not damage those resources.
    (j) Description of any potential conflicts with other uses and users 
of the area.
    (k) A detailed description of the nature and occurrence of the OCS 
mineral deposit(s) in the leased area with adequate maps and sections.
    (l) A detailed description of development and mining methods to be 
used, the proposed sequence of mining or development, the expected 
production rate, the method and location of the proposed processing 
operation, and the method of measuring production.
    (m) A detailed description of the method of transporting the 
produced OCS minerals from the lease to shore and adequate maps showing 
the locations of pipelines, conveyors, and other transportation 
facilities and corridors.
    (n) A detailed description of the cycle of all materials including 
samples and wastes, the method of discharge and disposal of waste and 
refuse, and the chemical and physical characteristics of the waste and 
refuse.
    (o) A description of measures to be taken to avoid, minimize, or 
otherwise mitigate air, land, and water pollution and damage to aquatic 
and wildlife species and their habitats; any unique or special features 
in the lease area, aquifers, or other natural resources of the OCS; and 
hazards to public health, safety, and navigation.
    (p) A detailed description of measures to be taken to monitor the 
impacts of the proposed mining and processing activities on the 
environment in accordance with Sec. 282.28(c) of this part.
    (q) A detailed description of practices and procedures to effect the 
abandonment of mining and processing activities. The proposed procedures 
shall indicate the steps to be taken to assure that mined areas on 
tailing deposits do not pose a threat to the environment and that the 
seafloor is left free of obstructions and structures that present a 
hazard to other users or uses of the OCS such as navigation or 
commercial fishing.
    (r) A description of potential environmental impacts of mining 
activities including the following:
    (1) The location of associated port, transport, processing, and 
waste disposal facilities and the affected environment (e.g., maps, land 
use, and layout);
    (2) A description of the nature and degree of potential 
environmental impacts of the proposed mining activities and the domestic 
socioeconomic effects of construction and operation of the associated 
facilities, including waste characteristics and toxicity;
    (3) Any proposed mitigation measures to avoid or minimize adverse 
impacts on the environment;
    (4) A certificate of consistency with the federally approved State 
coastal zone management program, where applicable; and
    (5) Alternative sites and technologies considered by the lessee and 
the reasons why they were not chosen.
    (s) Any other information needed for technical evaluation of the 
proposed

[[Page 494]]

activities and for the evaluation of potential impacts on the 
environment.



Sec. 282.25  Plan modification.

    Approved Delineation, Testing, and Mining Plans may be modified upon 
the Director's approval of the changes proposed. When circumstances 
warrant, the Director may direct the lessee to modify an approved plan 
to adjust to changed conditions. If the lessee requests the change, the 
lessee shall submit a detailed, written statement of the proposed 
modifications, potential, impacts, and the justification for the 
proposed changes. Revision of an approved plan whether initiated by the 
lessee or ordered by the Director shall be submitted to the Director for 
approval. When the Director determines that a proposed revision could 
result in significant change in the impacts previously identified and 
evaluated or requires additional permits, the proposed plan revision 
shall be subject to the applicable review and approval procedures of 
Secs. 282.21, 282.22, 282.23, and 282.24 of this part.



Sec. 282.26  Contingency Plan.

    (a) When required by the Director, a lessee shall include a 
Contingency Plan as part of its request for approval of a Delineation, 
Testing, or Mining Plan. The Contingency Plan shall comply with the 
requirements of Sec. 282.28(e) of this part.
    (b) The Director may order or the lessee may request the Director's 
approval of a modification of the Contingency Plan when such a change is 
necessary to reflect any new information concerning the nature, 
magnitude, and significance of potential equipment or procedural 
failures or the effectiveness of the corrective actions described in the 
Contingency Plan.



Sec. 282.27  Conduct of operations.

    (a) The lessee shall conduct all exploration, testing, development, 
and production activities and other operations in a safe and workmanlike 
manner and shall maintain equipment in a manner which assures the 
protection of the lease and its improvements, the health and safety of 
all persons, and the conservation of property, and the environment.
    (b) Nothing in this part shall preclude the use of new or 
alternative technologies, techniques, procedures, equipment, or 
activities, other than those prescribed in the regulations of this part, 
if such other technologies, techniques, procedures, equipment, or 
activities afford a degree of protection, safety, and performance equal 
to or better than that intended to be achieved by the regulations of 
this part, provided the lessee obtains the written approval of the 
Director prior to the use of such new or alternative technologies, 
techniques, procedures, equipment, or activities.
    (c) The lessee shall immediately notify the Director when there is a 
death or serious injury; fire, explosion, or other hazardous event which 
threatens damage to life, a mineral deposit, or equipment; spills of 
oil, chemical reagents, or other liquid pollutants which could cause 
pollution; or damage to aquatic life or the environment associated with 
operations on the lease. As soon as practical, the lessee shall file a 
detailed report on the event and action(s) taken to control the 
situation and to mitigate any further damage.
    (d)(1) Lessees shall provide means, at all reasonable hours either 
day or night, for the Director to inspect or investigate the conditions 
of the operation and to determine whether applicable regulations; terms 
and conditions of the lease; and the requirements of the approved 
Delineation, Testing, or Mining Plan are being met.
    (2) A lessee shall, on request by the Director, furnish food, 
quarters, and transportation for MMS representatives to inspect its 
facilities. Upon request, the lessee will be reimbursed by the United 
States for the actual costs which it incurs as a result of its providing 
food, quarters, and transportation for an MMS representative's stay of 
more than 10 hours. Request for reimbursement must be submitted within 
60 days following the cost being incurred.
    (e) Mining and processing vessels, platforms, structures, artificial 
islands, and mobile drilling units which have helicopter landing 
facilities shall be identified with at least one sign using letters and 
figures not less than

[[Page 495]]

12 inches in height. Signs for structures without helicopter landing 
facilities shall be identified with at least one sign using letters and 
figures not less than 3 inches in height. Signs shall be affixed at a 
location that is visible to approaching traffic and shall contain the 
following information which may be abbreviated:
    (1) Name of the lease operator;
    (2) The area designation based on Official OCS Protraction Diagrams;
    (3) The block number in which the facility is located; and
    (4) Vessel, platform, structure, or rig name.
    (f)(1) Drilling.
    (i) When drilling on lands valuable or potentially valuable for oil 
and gas or geopressured or geothermal resources, drilling equipment 
shall be equipped with blowout prevention and control devices acceptable 
to the Director before penetrating more than 500 feet unless a different 
depth is specified in advance by the Director.
    (ii) In cases where the Director determines that there is sufficient 
liklihood of encountering pressurized hydrocarbons, the Director may 
require that the lessee comply with all or portions of the requirements 
in part 250, subpart D, of this title.
    (iii) Before drilling any hole which may penetrate an aquifer, the 
lessee shall follow the procedures included in the approved plan for the 
penetration and isolation of the aquifer during the drilling operation, 
during use of the hole, and for subsequent abandonment of the hole.
    (iv) Cuttings from holes drilled on the lease shall be disposed of 
and monitored in accordance with the approved plan.
    (v) The use of muds in drilling holes on the lease and their 
subsequent disposition shall be according to the approved plan.
    (2) All drill holes which are susceptible to logging shall be 
logged, and the lessee shall prepare a detailed lithologic log of each 
drill hole. Drill holes which are drilled deeper than 500 feet shall be 
drilled in a manner which permits logging. Copies of logs of cores and 
cuttings and all in-hole surveys such as electronic logs, gamma ray 
logs, neutron density logs, and sonic logs shall be provided to the 
Director.
    (3) Drill holes for exploration, testing, development, or production 
shall be properly plugged and abandoned to the satisfaction of the 
Director in accordance with the approved plan and in such a manner as to 
protect the surface and not endanger any operation; any freshwater 
aquifer; or deposit of oil, gas, or other mineral substance.
    (g) The use of explosives on the lease shall be in accordance with 
the approved plan.
    (h)(1) Any equipment placed on the seabed shall be designed to allow 
its recovery and removal upon abandonment of leasehold activities.
    (2) Disposal of equipment, cables, chains, containers, or other 
materials into the ocean is prohibited.
    (3) Materials, equipment, tools, containers, and other items used on 
the OCS which are of such shape or configuration that they are likely to 
snag or damage fishing devices shall be handled and marked as follows:
    (i) All loose materials, small tools, and other small objects shall 
be kept in a suitable storage area or a marked container when not in use 
or in a marked container before transport over OCS waters;
    (ii) All cable, chain, or wire segments shall be recovered after use 
and securely stored;
    (iii) Skid-mounted equipment, portable containers, spools or reels, 
and drums shall be marked with the owner's name prior to use or 
transport over OCS waters; and
    (iv) All markings must clearly identify the owner and must be 
durable enough to resist the effects of the environmental conditions to 
which they are exposed.
    (4) Any equipment or material described in paragraphs (h)(2), 
(h)(3)(ii), and (h)(3)(iii) of this section that is lost overboard shall 
be recorded on the daily operations report of the facility and reported 
to the Director and to the U.S. Coast Guard.
    (i) Any bulk sampling or testing that is necessary to be conducted 
prior to submission of a Mining Plan shall be in accordance with an 
approved Testing Plan. The sale of any OCS minerals acquired under an 
approved Testing Plan

[[Page 496]]

shall be subject to the payment of the royalty specified in the lease to 
the United States.
    (j) Installations and structures.
    (1) The lessee shall design, fabricate, install, use, inspect, and 
maintain all installations and structures, including platforms on the 
OCS, to assure the structural integrity of all installations and 
structures for the safe conduct of exploration, testing, mining, and 
processing activities considering the specific environmental conditions 
at the location of the installation or structure.
    (2) All fixed or bottom-founded platforms or other structures, e.g., 
artificial islands shall be designed, fabricated, installed, inspected, 
and maintained in accordance with the provisions of part 250, subpart I, 
of this title.
    (k) The lessee shall not produce any OCS mineral until the method of 
measurement and the procedures for product valuation have been 
instituted in accordance with the approved Testing or Mining Plan. The 
lessee shall enter the weight or quantity and quality of each mineral 
produced in accordance with Sec. 282.29 of this title.
    (l) The lessee shall conduct OCS mineral processing operations in 
accordance with the approved Testing or Mining Plan and use due 
diligence in the reduction, concentration, or separation of mineral 
substances by mechanical or chemical processes, by evaporation, or other 
means, so that the percentage of concentrates or other mineral 
substances are recovered in accordance with the practices approved in 
the Testing or Mining Plan.
    (m) No material shall be discharged or disposed of except in 
accordance with the approved disposal practice and procedures contained 
in the approved Delineation, Testing, or Mining Plan.



Sec. 282.28  Environmental protection measures.

    (a) Exploration, testing, development, production, and processing 
activities proposed to be conducted under a lease will only be approved 
by the Director upon the determination that the adverse impacts of the 
proposed activities can be avoided, minimized, or otherwise mitigated. 
The Director shall take into account the information contained in the 
sale-specific environmental evaluation prepared in association with the 
lease offering as well as the site- and operational-specific 
environmental evaluations prepared in association with the review and 
evaluation of the approved Delineation, Testing, or Mining Plan. The 
Director's review of the air quality consequences of proposed OCS 
activities will follow the practices and procedures specified in 
Secs. 250.26, 250.33(b)(19), 250.34(b)(12), and 250.45 of this title.
    (b) If the baseline data available are judged by the Director to be 
inadequate to support an environmental evaluation of a proposed 
Delineation, Testing, or Mining Plan, the Director may require the 
lessee to collect additional environmental baseline data prior to the 
approval of the activities proposed.
    (c)(1) The lessee shall monitor activities in a manner that develops 
the data and information necessary to enable the Director to assess the 
impacts of exploration, testing, mining, and processing activities on 
the environment on and off the lease; develop and evaluate methods for 
mitigating adverse environmental effects; validate assessments made in 
previous environmental evaluations; and ensure compliance with lease and 
other requirements for the protection of the environment.
    (2) Monitoring of environmental effects shall include determination 
of the spatial and temporal environmental changes induced by the 
exploration, testing, development, production, and processing activities 
on the flora and fauna of the sea surface, the water column, and/or the 
seafloor.
    (3) The Director may place observers onboard exploration, testing, 
mining, and processing vessels; installations; or structures to ensure 
that the provisions of the lease, the approved plan, and these 
regulations are followed and to evaluate the effectiveness of the 
approved monitoring and mitigation practices and procedures in 
protecting the environment.
    (4) The Director may order or the lessee may request a modification 
of the approved monitoring program prior to the startup of testing 
activities or commercial-scale recovery, and at other appropriate times 
as necessary,

[[Page 497]]

to reflect accurately the proposed operations or to incorporate the 
results of recent research or improved monitoring techniques.
    (5) When prototype test mining is proposed, the lessee shall include 
a monitoring strategy for assessing the impacts of the testing 
activities and for developing a strategy for monitoring commercial-scale 
recovery and mitigating the impacts of commercial-scale recovery more 
effectively. At a minimum, the proposed monitoring activities shall 
address specific concerns expressed in the lease-sale environmental 
analysis.
    (6) When required, the monitoring plan shall specify:
    (i) The sampling techniques and procedures to be used to acquire the 
needed data and information;
    (ii) The format to be used in analysis and presentation of the data 
and information;
    (iii) The equipment, techniques, and procedures to be used in 
carrying out the monitoring program; and
    (iv) The name and qualifications of person(s) designated to be 
responsible for carrying out the environmental monitoring.
    (d) Lessees shall develop and conduct their operations in a manner 
designed to avoid, minimize, or otherwise mitigate environmental impacts 
and to demonstrate the effectiveness of efforts to that end. Based upon 
results of the monitoring program, the Director may specify particular 
procedures for mitigating environmental impacts.
    (e) In the event that equipment or procedural failure might result 
in significant additional damage to the environment, the lessee shall 
submit a Contingency Plan which specifies the procedures to be followed 
to institute corrective actions in response to such a failure and to 
minimize adverse impacts on the environment. Such procedures shall be 
designed for the site and mining activities described in the approved 
Delineation, Testing, or Mining Plan.



Sec. 282.29  Reports and records.

    (a) A report of the amount and value of each OCS mineral produced 
from each lease shall be made by the payor for the lease for each 
calendar month, beginning with the month in which approved testing, 
development, or production activities are initiated and shall be filed 
in duplicate with the Director on or before the 20th day of the 
succeeding month, unless an extension of time for the filing of such 
report is granted by the Director. The report shall disclose accurately 
and in detail all operations conducted during each month and present a 
general summary of the status of leasehold activities. The report shall 
be submitted each month until the lease is terminated or relinquished 
unless the Director authorizes omission of the report during an approved 
suspension of production. The report shall show for each calendar month 
the location of each mining and processing activity; the number of days 
operations were conducted; the identity, quantity, quality, and value of 
each OCS mineral produced, sold, transferred, used or otherwise disposed 
of; identity, quantity, and quality of an inventory maintained prior to 
the point of royalty determination; and other information as may be 
required by the Director.
    (b) The lessee shall submit a status report on exploration and/or 
testing activities under an approved Delineation or Testing Plan to the 
Director within 30 days of the close of each calendar quarter which 
shall include:
    (1) A summary of activities conducted;
    (2) A listing of all geophysical and geochemical data acquired and 
developed such as acoustic or seismic profiling records;
    (3) A map showing location of holes drilled and where bottom samples 
were taken; and
    (4) Identification of samples analyzed.
    (c) Each lessee shall submit to the Director a report of exploration 
and/or testing activities within 3 months after the completion of 
operations. The final report of exploration and/or testing activities 
conducted on the lease shall include:
    (1) A description of work performed;
    (2) Charts, maps, or plats depicting the area and leases in which 
activities were conducted specifically identifying the lines of 
geophysical traverses and/

[[Page 498]]

or the locations where geological activity was conducted and/or the 
locations of other exploration and testing activities;
    (3) The dates on which the actual operations were performed;
    (4) A narrative summary of any mineral occurrences; environmental 
hazards; and effects of the activities on the environment, aquatic life, 
archaeological resources, or other uses and users of the area in which 
the activities were conducted;
    (5) Such other descriptions of the activities conducted as may be 
specified by the Director; and
    (6) Records of all samples from core drilling or other tests made on 
the lease. The records shall be in such form that the location and 
direction of the samples can be accurately located on a map. The records 
shall include logs of all strata penetrated and conditions encountered, 
such as minerals, water, gas, or unusual conditions, and copies of 
analyses of all samples analyzed.
    (d) The lessee shall report the results of environmental monitoring 
activities required in Sec. 282.28 of this part and shall submit such 
other environmental data as the Director may require to conform with the 
requirements of these regulations.
    (e)(1) All maps shall be appropriately marked with reference to 
official lease boundaries and elevations marked with reference to sea 
level. When required by the Director, vertical projections and cross 
sections shall accompany plan views. The maps shall be kept current and 
submitted to the Director annually, or more often when required by the 
Director. The accuracy of maps furnished shall be certified by a 
professional engineer or land surveyor.
    (2) The lessee shall prepare such maps of the leased lands as are 
necessary to show the geological conditions as determined from G&G 
surveys, bottom sampling, drill holes, trenching, dredging, or mining. 
All excavations shall be shown in such manner that the volume of OCS 
minerals produced during a royalty period can be accurately ascertained.
    (f) Any lessee who acquires rock, mineral, and core samples under a 
lease shall keep a representative split of each geological sample and a 
quarter longitudinal segment of each core for 5 years during which time 
the samples shall be available for inspection at the convenience of the 
Director who may take cuts of such cores, cuttings, and samples.
    (g)(1) The lessee shall keep all original data and information 
available for inspection or duplication, by the Director at the expense 
of the lessor, as long as the lease continues in force. Should the 
lessee choose to dispose of original data and information once the lease 
has expired, said data and information shall be offered to the lessor 
free of costs and shall, if accepted, become the property of the lessor.
    (2) Navigation tapes showing the location(s) where samples were 
taken and test drilling conducted shall be retained for as long as the 
lease continues in force.
    (h) Lessees shall maintain records in which will be kept an accurate 
account of all ore and rock mined; all ore put through a mill; all 
mineral products produced; all ore and mineral products sold, 
transferred, used, or otherwise disposed of and to whom sold or 
transferred, and the inventory weight, assay value, moisture content, 
base sales price, dates, penalties, and price received. The percentage 
of each of the mineral products recovered and the percentages lost shall 
be shown. The records associated with activities on a lease shall be 
available to the Director for auditing.
    (i) When special forms or reports other than those referred to in 
the regulations in this part may be necessary, instructions for the 
filing of such forms or reports will be given by the Director.



Sec. 282.30  Right of use and easement.

    (a) A right of use and easement that includes any area subject to a 
lease issued or maintained under the Act shall be granted only after the 
lessee has been notified by the requestor and afforded the opportunity 
to comment on the request. A holder of a right under a right of use and 
easement shall exercise that right in accordance with the requirements 
of the regulations in this part. A right of use and easement shall be 
exercised only in a manner which

[[Page 499]]

does not interfere unreasonably with operations of any lessee on its 
lease.
    (b) Once a right of use and easement has been exercised, the right 
shall continue, beyond the termination of any lease on which it may be 
situated, as long as it is demonstrated to the Director that the right 
of use and easement is being exercised by the holder of the right and 
that the right of use and easement continues to serve the purpose 
specified in the grant. If the right of use and easement extends beyond 
the termination of any lease on which the right may be situated or if it 
is situated on an unleased portion of the OCS, the rights of all 
subsequent lessees shall be subject to such right. Upon termination of a 
right of use and easement, the holder of the right shall abandon the 
premises in the same manner that a lessee abandons activities on a lease 
to the satisfaction of the Director.



Sec. 282.31  Suspension of production or other operations.

    A lessee may submit a request for a suspension of production or 
other operations. The request shall include justification for granting 
the requested suspension, a schedule of work leading to the initiation 
or restoration of production or other operations, and any other 
information the Director may require.



                           Subpart D--Payments



Sec. 282.40  Bonds.

    (a) Pursuant to the requirements for a bond in Sec. 281.33 of this 
title, prior to the commencement of any activity on a lease, the lessee 
shall submit a surety or personal bond to cover the lessee's royalty and 
other obligations under the lease as specified in this section.
    (b) All bonds furnished by a lessee or operator must be in a form 
approved by the Associate Director for Offshore Minerals Management. A 
single copy of the required form is to be executed by the principal or, 
in the case of surety bonds, by both the principal and an acceptable 
surety.
    (c) Only those surety bonds issued by qualified surety companies 
approved by the Department of the Treasury shall be accepted. (See 
Department of Treasury Circular No. 570 and any supplemental or 
replacement circulars.)
    (d) Personal bonds shall be accompanied by a cashier's check, 
certified check, or negotiable U.S. Treasury bonds of an equal value to 
the amount specified in the bond. Negotiable Treasury bonds shall be 
accompanied by a proper conveyance of full authority to the Director to 
sell such securities in case of default in the performance of the terms 
and conditions of the lease.
    (e) A bond in the minimum amount of $50,000 to cover the lessee's 
obligations under the lease shall be submitted prior to the commencement 
of any activity on a leasehold. A $50,000 bond shall not be required on 
a lease if the lessee already maintains or furnishes a $300,000 bond 
conditioned on compliance with the terms of leases for OCS minerals 
other than oil, gas, and sulphur held by the lessee on the OCS for the 
area in which the lease is located. A bond submitted pursuant to 
Sec. 256.58(a) of this chapter may be amended to include the 
aforementioned condition for compliance. Prior to approval of a 
Delineation, Testing, or Mining Plan, the bond amount shall be adjusted, 
if appropriate, to cover the operations and activities described in the 
proposed plan.
    (f) For the purposes of this section there are four areas:
    (1) The Gulf of Mexico;
    (2) The area offshore the Pacific Coast States of California, 
Oregon,Washington, and Hawaii;
    (3) The area offshore the coast of Alaska; and
    (4) The area offshore the Atlantic coast.
    (g) A separate bond shall be required for each area. An operator's 
bond may be submitted for a specific lease(s) in the same amount as the 
lessee's bond(s) applicable to the lease(s) involved.
    (h) Where, upon a default, the surety makes a payment to the United 
States of an obligation incurred under a lease, the face amount of the 
surety bond and the surety's liability thereunder shall be reduced by 
the amount of such payment.
    (i) After default, the principal shall, within 6 months after notice 
or within such shorter period as may be fixed by

[[Page 500]]

the Director, either post a new bond or increase the existing bond to 
the amount previously held. In lieu thereof, the principal may, within 
that time, file separate or substitute bonds for each lease. Failure to 
meet these requirements may result in a suspension of operations 
including production on leases covered by such bonds.
    (j) The Director shall not consent to termination of the period of 
liability of any bond unless an acceptable alternative bond has been 
filed or until all the terms and conditions of the lease covered by the 
bond have been met.

[54 FR 2067, Jan. 18, 1989, as amended at 62 FR 27960, May 22, 1997]

    Effective Date Note: At 62 FR 27960, May 22, 1997, Sec. 282.40 was 
amended by revising the first sentence of paragraph (b), effective Aug. 
20, 1997. For the convenience of the user, the superseded text is set 
forth as follows:
Sec. 282.40  Bonds.

                                * * * * *

    (b) All bonds furnished by a lessee or operator shall be in a form 
or on a form approved by the Director.* * *

                                * * * * *



Sec. 282.41  Method of royalty calculation.

    In the event that the provisions of royalty management regulations 
do not apply to the specific commodities produced under regulations in 
this part, the lessee shall comply with procedures specified in the 
leasing notice.



Sec. 282.42  Payments.

    Rentals, royalties, and other payments due the Federal Government on 
leases for OCS minerals shall be paid and reports submitted by the payor 
for a lease in accordance with Sec. 281.26 of this title.



                           Subpart E--Appeals



Sec. 282.50  Appeals.

    Orders or decisions issued under the regulations in this part may be 
appealed in accordance with the provisions of part 290 of this title. 
The filing of an appeal with the Director shall not suspend the 
requirement for compliance with an order or decision other than the 
payment of a civil penalty.

[[Page 501]]



                          SUBCHAPTER C--APPEALS





PART 290--APPEALS PROCEDURES--Table of Contents




Sec.
290.1  Scope.
290.2  Who may appeal.
290.3  Appeals to Director.
290.4  Oral argument.
290.5  Time limitations.
290.6  Appeals to the Commissioner of Indian Affairs.
290.7  Appeals to the Board of Land Appeals.

    Authority: R.S. 463, 25 U.S.C. 2; R.S. 465, 25 U.S.C. 9; sec. 32, 41 
Stat. 450, 30 U.S.C. 189; sec. 5, 44 Stat. 1058, 30 U.S.C. 285; sec. 10, 
61 Stat. 915, 30 U.S.C. 359; sec. 5, 6, 67 Stat. 464, 465, 43 U.S.C. 
1334, 1335; sec. 24, 84 Stat. 1573, 30 U.S.C. 1023; 30 U.S.C. 1751.

    Source: 38 FR 10001, Apr. 23, 1973, unless otherwise noted.



Sec. 290.1   Scope.

    The rules and procedures set forth herein apply to appeals to the 
Director, Minerals Management Service (and the Commissioner of Indian 
Affairs when Indian lands are involved) from final orders or decisions 
of officers of the Minerals Management Service, issued under authority 
of the regulations in chapter II of this title, 43 CFR part 23, 43 CFR 
subtitle B, chapter II, and 25 CFR part 177. This part also provides for 
the further right of appeal to the Board of Land Appeals in the Office 
of Hearings and Appeals, Office of the Secretary, from adverse decisions 
of the Director (and the Commissioner of Indian Affairs when Indian 
lands are involved) rendered under this part.

[38 FR 10001, Apr. 23, 1973, as amended at 47 FR 28370, June 30, 1982]



Sec. 290.2   Who may appeal.

    Any party to a case adversely affected by a final order or decision 
of an officer of the Minerals Management Service shall have a right to 
appeal to the Director, Minerals Management Service, unless the decision 
was approved by the Secretary or the Director prior to promulgation.

[38 FR 10001, Apr. 23, 1973, as amended at 47 FR 28370, June 30, 1982]



Sec. 290.3   Appeals to Director.

    (a)(1) An appeal to the Director, Minerals Management Service, may 
be taken by filing a notice of appeal in the office of the official 
issuing the order or decision within 30 days from service of the order 
or decision. The notice of appeal shall incorporate or be accompanied by 
such written showing and argument on the facts and laws as the appellant 
may deem adequate to justify reversal or modification of the order or 
decision. Within the same 30-day period, the appellant will be permitted 
to file in the office of the official issuing the order or decision 
additional statements of reasons and written arguments or briefs.
    (2) No extension of time will be granted for filing the notice of 
appeal. If the notice is filed after the grace period provided in 
Sec. 290.5(b) of this title and the delay in filing is not waived, as 
provided by that section, the notice of appeal will not be considered 
and the case will be closed.
    (b) The officer with whom the appeal is filed shall transmit the 
appeal and accompanying papers to the Director, Minerals Management 
Service, with a full report and his recommendation on the appeal.
    (c) The Director will review the record and render a decision in the 
case.

[38 FR 10001, Apr. 23, 1973, as amended at 54 FR 52797, Dec. 22, 1989]



Sec. 290.4   Oral argument.

    Oral argument in any case pending before the Director, Minerals 
Management Service, will be allowed on motion in the discretion of such 
officer and at a time to be fixed by him.



Sec. 290.5   Time limitations.

    (a) With the exception of the time fixed for filing a notice of 
appeal, the time for filing any document in connection with an appeal 
may be extended by the Director, Minerals Management Service. A request 
for an extension of time must be filed within

[[Page 502]]

the time allowed for filing of the document and must be filed in the 
same office in which the document in connection with which the extension 
is requested must be filed.
    (b) A notice of appeal must be filed within the time provided in 
Sec. 290.3 of this title. If the notice of appeal is not received in the 
proper office within that time, the delay in filing will be waived if 
the notice of appeal is filed not later than 10 days after it was 
required to be filed and it is determined that the notice of appeal was 
transmitted to the proper office before the end of the time required for 
filing in Sec. 290.3(a)(1) of this title. Determinations under this 
paragraph shall be made by the officer with whom the notice of appeal is 
required to be filed.

[38 FR 10001, Apr. 23, 1973, as amended at 54 FR 52797, Dec. 22, 1989]



Sec. 290.6   Appeals to the Commissioner of Indian Affairs.

    The procedure for appeals under this part shall be followed for 
permits and leases on Indian land except that with respect to such 
permits and leases, the Commissioner of Indian Affairs will exercise the 
functions vested in the Director, Minerals Management Service.



Sec. 290.7   Appeals to the Board of Land Appeals.

    Any party to a case adversely affected by a final decision of the 
Director, Minerals Management Service, or the Commissioner of Indian 
Affairs under this part shall have a right of appeal to the Board of 
Land Appeals in the Office of Hearings and Appeals, Office of the 
Secretary, in accordance with the procedures provided in 43 CFR part 4, 
``Department Hearings and Appeals Procedures.''

[[Page 503]]



CHAPTER III--BOARD OF SURFACE MINING AND RECLAMATION APPEALS, DEPARTMENT OF THE INTERIOR




  --------------------------------------------------------------------

Part                                                                Page
301             Procedures under Surface Mining Control and 
                    Reclamation Act of 1977.................         504

[[Page 504]]



PART 301--PROCEDURES UNDER SURFACE MINING CONTROL AND RECLAMATION ACT OF 1977--Table of Contents




Authority: Sec. 201, Pub. L. 95-87, 91 Stat. 445, 30 U.S.C. 1201 et seq.



Sec. 301.1  Cross reference.

    For special rules applicable to hearings, appeals, and other review 
procedures relating to surface mining control and reclamation within the 
jurisdiction of administrative law judges and the Interior Board of 
Surface Mining and Reclamation Appeals, Office of Hearings and Appeals, 
see Subpart L of part 4 of subtitle A--Office of the Secretary of the 
Interior, of title 43 CFR. Subpart A of part 4 and all of the general 
rules in subpart B of part 4 not inconsistent with the special rules in 
subpart L of part 4 are also applicable to such hearings, appeals and 
other review proceedings.

[43 FR 41974, Sept. 19, 1978]

[[Page 505]]



        CHAPTER IV--GEOLOGICAL SURVEY, DEPARTMENT OF THE INTERIOR




  --------------------------------------------------------------------

Part                                                                Page
401             State Water Research Institute Program......         506
402             Water-Resources Research Program and the 
                    Water-Resources Technology Development 
                    Program.................................         511

[[Page 506]]



PART 401--STATE WATER RESEARCH INSTITUTE PROGRAM--Table of Contents




                           Subpart A--General

Sec.
401.1  Purpose.
401.2  Delegation of authority.
401.3  Definitions.
401.4  Information collection.
401.5  [Reserved]

        Subpart B--Designation of Institutes; Institute Programs

401.6  Designation of institutes.
401.7  Programs of institutes.
401.8-401.10  [Reserved]

            Subpart C--Application and Management Procedures

401.11  Applications for grants.
401.12  Program management.
401.13-401.18  [Reserved]

                          Subpart D--Reporting

401.19  Reporting procedures.
401.20-401.25  [Reserved]

                          Subpart E--Evaluation

401.26  Evaluation of institutes.

    Authority: 42 U.S.C. 10303.

    Source: 50 FR 23114, May 31, 1985, unless otherwise noted.



                           Subpart A--General



Sec. 401.1  Purpose.

    The regulations in this part are issued pursuant to title I of the 
Water Research Act of 1984 (Pub. L. 98-242, 98 Stat. 97) which 
authorizes appropriations to, and confers authority upon, the Secretary 
of the Interior to promote a national program of water-resources 
research.



Sec. 401.2  Delegation of authority.

    The State Water Research Institute Program, as authorized by section 
104 of the Act, has been established as a component of the U.S. 
Geological Survey (USGS). Secretary of the Interior has delegated to the 
Director of the USGS authority to take the actions and make the 
determinations that, under the Act, are the responsibility of the 
Secretary.



Sec. 401.3  Definitions.

    Act means the Water Resources Research Act of 1984 (Pub. L. 98-242, 
98 Stat. 97).
    Fiscal year means a 12-month period ending on September 30.
    Director means the Director of the USGS or a designee.
    Grant means the funds made available to an institute in a particular 
fiscal year pursuant to section 104 of the Act and the regulations in 
this chapter.
    Grantee means the college or university at which an institute is 
established.
    Granting agency means the USGS.
    Institute means a water resources research institute, center, or 
equivalent agency established in accordance with Title I of the Act.
    Region means any grouping of two or more institutes mutually chosen 
by themselves to reflect a commonality of water-resources problems.
    Scientists means individuals engaged in any professional discipline, 
including the life, physical or social sciences, and engineers.
    Secretary means the Secretary of the Interior or a designee.
    State means each of the 50 States, the Commonwealth of Puerto Rico, 
the Virgin Islands, the District of Columbia, Guam, American Samoa, the 
Commonwealth of the Mariana Islands, and the Federated States of 
Micronesia.

[50 FR 23114, May 31, 1985, as amended at 58 FR 27204, May 7, 1993]



Sec. 401.4  Information collection.

    (a) The information collection requirements contained in sections 
401.11 and 401.19 have been approved by the Office of Management and 
Budget under 44 U.S.C. 3501 et seq. and assigned clearance number 1028-
0044. The information will be used to support water related research and 
provide performance reports on accomplishments achieved under Pub. L. 
98-242, 98 Stat. 97 (42 U.S.C. 10303). This information allows the 
agency to determine compliance with the objectives and criteria of the 
grant programs. Response is mandatory in accordance with 30 CFR 401.11 
and 401.19.

[[Page 507]]

    (b) Public reporting burden for the collection of information is 
estimated to average 84 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the collection 
of information. Send comments regarding this burden estimate, or any 
other suggestions for reducing the burden, to Paperwork Management 
Officer, U.S. Geological Survey, Paperwork Management Section MS 208, 
Reston, Virginia 22092 and the Office of Management and Budget, 
Paperwork Reduction Project (1028-0044), Washington, DC 20503.

[58 FR 27204, May 7, 1993]
Sec. 401.5  [Reserved]



        Subpart B--Designation of Institutes; Institute Programs



Sec. 401.6  Designation of institutes.

    (a) As a condition of recognition as an established institute under 
the provisions of this chapter, each institute shall provide to the 
Director written evidence that it conforms to the requirements of 
subsection 104(a) of the Act, in that:
    (1) The institute is established at the college or university in the 
State that was established in accordance with the Act of July 21, 1862 
(12 Stat. 503; 7 U.S.C. 301ff), i.e., a ``land-grant'' institution, or;
    (2) If established at some other institution, the institute is at a 
college or university that has been designated by act of the legislature 
for the purposes of the Act, or;
    (3) If there is more than one ``land-grant'' institution in the 
State, and no designation has been made according to paragraph (a)(2) of 
this section, the institute has been established at the one such 
institution designated by the Governor of the State to participate in 
the program, or;
    (4) The institute has been designated as an interstate or regional 
institute by two or more cooperating States as provided in the Act.
    (b) The certification of designation made pursuant to paragraph (a) 
of this section shall originate following the issuance of these 
regulations, be signed by the highest ranking officer of the college or 
university at which the institute is established and be submitted to the 
Director within 90 days of the effective date of these regulations. It 
shall be accompanied either by the evidence of establishment under the 
provisions of 30 CFR part 401 or by new evidence of establishment made 
pursuant to these regulations.
    (c) Any institute not previously established under the provisions of 
the Water Resources Act of 1964 (Pub. L. 88-379, 78 Stat. 331) or the 
Water Research and Development Act of 1978 (Pub. L. 95-467, 92 Stat. 
1305) shall also, in addition to the annual program application 
specified in Sec. 401.11 of this chapter, submit to the Director the 
following information:
    (1) Evidence of the appointment by the governing authority of the 
college or university of an officer to receive and account for all funds 
paid under the provisions of the Act and to make annual reports to the 
granting agency on work accomplished; and
    (2) A management plan for meeting the requirements of the evaluation 
mandated by Sec. 401.26.

[50 FR 23114, May 31, 1985, as amended at 58 FR 27204, May 7, 1993]



Sec. 401.7  Programs of institutes.

    (a) Release of grant funds to participating institutes is 
conditioned on the ability of each receiving institute to plan, conduct, 
or otherwise arrange for:
    (1) Competent research, investigations, and experiments of either a 
basic or practical nature, or both, in relation to water resources;
    (2) Promotion of the dissemination and application of the results of 
these efforts; and
    (3) Assistance in the training of scientists in relevant fields of 
endeavor to water resources through the research, investigations, and 
experiments.
    (b) Such research, investigations, experiments and training may 
include:
    (1) Aspects of the hydrologic cycle;
    (2) Supply and demand;
    (3) Demineralization of saline and other impaired waters;
    (4) Conservation and best use of available supplies of water and 
methods of increasing such supplies;
    (5) Water reuse;

[[Page 508]]

    (6) Depletion and degradation of ground-water supplies;
    (7) Improvements in the productivity of water when used for 
agricultural, municipal, and commercial purposes;
    (8) The economic, legal, engineering, social, recreational, 
biological, geographical, ecological, or other aspects of water 
problems;
    (9) Scientific information dissemination activities, including 
identifying, assembling, and interpreting the results of scientific 
research on water resources problems, and ;
    (10) Providing means for improved communication of research results, 
having due regard for the varying conditions and needs of the respective 
States and regions.
    (c) An institute shall cooperate closely with other colleges and 
universities in the State that have demonstrated capabilities for 
research, information dissemination and graduate training in the 
development of its program. For purposes of financial management, 
reporting and other research program management and administration 
activities, the institutes shall be responsible for performance of the 
activities of other participating institutions.
    (d) Each institute shall cooperate closely with other institutes and 
other research organizations in the region to increase the effectiveness 
of the institutes, to coordinate their activities, and to avoid undue 
duplication of effort.
Secs. 401.8-401.10  [Reserved]



            Subpart C--Application and Management Procedures



Sec. 401.11  Applications for grants.

    (a) Subject to the availability of appropriated funds, but not to 
exceed a total of $10 million, an equal amount of dollars will be 
available to each qualified institute in each fiscal year to assist it 
in carrying out the purposes of the Act. If the full amount of the 
appropriated funds is not obligated by the close of the fiscal year for 
which they were appropriated, the remaining funds shall be made 
available in the succeeding fiscal year to support competitively 
selected research projects under the terms of section 104(g) of the Act. 
Selection and approval of such projects shall be based on criteria to be 
determined by the Director. Announcement of such criteria shall be made 
by notice in the Federal Register. The granting agency may retain an 
amount up to 15 percent of the total appropriation for administrative 
costs.
    (b) The granting agency will annually make available to qualified 
institutes instructions for the submittal of applications for grants. 
The instructions will include information pertinent only to a single 
fiscal year, such as the closing date for applications and the amount of 
funds initially available to each institute. They also will include 
notification of the provisions and assurances necessary to ensure that 
administration of the grant will be conducted in compliance with this 
chapter and other Federal laws and regulations applicable to grants to 
institutions of higher learning.
    (c) In making its application for funds to which it is entitled 
under the Act, each institute shall use and follow the standard form for 
Federal assistance (SF 424, Federal Assistance). No preapplication is 
required. The institute shall include in section IV of Standard Form 424 
evidence that its application was:
    (1) Developed in close consultation and collaboration with senior 
personnel of the State's department of water resources or similar 
agencies, other leading water resources officials within the State, and 
interested members of the public;
    (2) Coordinated with other institutes in the region for the purposes 
of avoiding duplication of effort and encouraging regional cooperation 
in research areas of water management, development, and conservation 
that have a regional or national character; and
    (3) Reviewed for technical merit of its research components by 
qualified scientists.
    (d) Each application shall further include:
    (1) A financial plan relating expenditures to scheduled activity and 
rate of effort to be expended and indicating the times at which there 
will be need for specified amounts of Federal funds; and

[[Page 509]]

    (2) A description of the institute's arrangements for development, 
administration, and technical oversight of the research program.
    (e) Each annual program application is to include separately 
identifiable proposals for conduct of research to meet the needs of the 
State and region. Such proposals must set forth for each project:
    (1) The nature, scope and objectives of the project to be 
undertaken;
    (2) Its importance to the State, region, or Nation; its relation to 
other known research projects already completed or in progress; and the 
anticipated applicability of the research results;
    (3) The period during which it will be pursued;
    (4) The names and qualifications of the senior professional 
personnel who will direct and conduct the project;
    (5) Its estimated costs, with a breakdown of the costs per year; and
    (6) The extent of which it will provide opportunity for the training 
of scientists.
    (f) Each program application shall contain a plan for disseminating 
information on the results of research and promoting their application. 
Plans which require the use of grant funds shall contain:
    (1) Definition of the topics for dissemination;
    (2) Identification of the target audiences for dissemination;
    (3) Strategies for accomplishing the dissemination;
    (4) Duties and qualifications of the personnel to be involved;
    (5) Estimated costs of each identifiable element of the plan; and
    (6) Identification of cooperating entities.
    (g) The application shall provide assurance that non-Federal dollars 
will be available to share the costs of the proposed program. The 
Federal funds are to be matched on a basis of no less than two non-
Federal dollars for each Federal dollar, unless this matching 
requirement has been waived.
    (h) The granting agency will evaluate the proposals for consistency 
with the provisions of its instructions and this chapter and within no 
more than 90 days request any revisions and additions necessary for such 
consistency.

[50 FR 23114, May 31, 1985, as amended at 58 FR 27204, May 7, 1993]



Sec. 401.12  Program management.

    (a) Upon approval of each fiscal year's proposed program, the 
granting agency will transmit to the grantee an award which will 
incorporate the application and assurances.
    (b) The grant is effective and constitutes an obligation of Federal 
funds in the amount and for the purpose stated in the award document at 
the time of the Director's signature.
    (c)(1) Acceptance of the award document certifies the grantee's 
assurance that the grant will be administered in compliance with OMB 
regulations, policies, guidelines, and requirements as described in:
    (i) Circular No. A-21, revised, Cost Principles of Educational 
Institutions;
    (ii) Memorandum No. M-92-01, Coordination of Water Resources 
Information;
    (iii) Circular No. A-88, revised, Indirect Cost Rates, Audit and 
Audit Follow-up at Educational Institutions;
    (iv) Circular No. A-110, Uniform Administrative Requirements for 
Grants and Agreements with Institutions of Higher Education, Hospitals 
and other Nonprofit Organizations; and
    (v) Circular No. A-124, Patents--Small Business Firms and Nonprofit 
Organizations.
    (2) Copies of the documents listed in paragraph (c)(1) of this 
section shall be available from the granting agency.

[50 FR 23114, May 31, 1985, as amended at 58 FR 27204, May 7, 1993]
Secs. 401.13-401.18  [Reserved]



                          Subpart D--Reporting



Sec. 401.19  Reporting procedures.

    (a) The institutes are encouraged to publish, as technical reports 
or in the professional literature, the findings, results, and 
conclusions relating to separately identifiable research projects 
undertaken pursuant to the Act.

[[Page 510]]

    (b) Each institute shall submit to the granting agency, by a date to 
be specified in the award document, an annual program report which 
provides:
    (1) A statement concerning the relationship of the institute's 
program to the water problems and issues of the State;
    (2) A synopsis of the objectives, methods, and conclusions of each 
project completed within the period covered;
    (3) A progress report on each project continuing into the subsequent 
fiscal year;
    (4) Citations of all reports, papers, publications or other 
communicable products resulting from each project completed or in 
progress;
    (5) A description of all activities undertaken for the purpose of 
promoting the application of research results;
    (6) A description of cooperative arrangements with other educational 
institutions, State agencies, and others.
    (c) One manuscript of reproducible quality and two copies of the 
annual program report shall be furnished to the granting agency. One 
copy of a complete report on the objectives, methods, and conclusions of 
each research project shall be maintained by the institute and open to 
inspection.
    (d) Appropriate acknowledgment shall be given by institutes to the 
granting agency's participation in financing activities carried out 
under provisions of the Act. Such acknowledgment shall be included in 
all reports, publications, news releases, and other information media 
developed by institutes and others to publicize, describe, or report 
upon accomplishments and activities of the program.
    (e) An original and two copies of the final ``Financial Status 
Report,'' SF 269, shall be furnished to the granting agency within 90 
days of completion of the grant period.
Secs. 401.20-401.25  [Reserved]



                          Subpart E--Evaluation



Sec. 401.26  Evaluation of institutes.

    (a) Within 2 years of the date of its certification according to the 
provisions of Sec. 401.6, each institute will be evaluated for the 
purpose of determining whether the national interest warrants its 
continued support under the provisions of the Act. That determination 
shall be based on:
    (1) The quality and relevance of its water resources research as 
funded under the Act;
    (2) Its effectiveness as an institution for planning, conducting, or 
arranging for research;
    (3) Its demonstrated performance in making research results 
available to users in the State and elsewhere; and
    (4) Its demonstrated record in providing for the training of 
scientists through student involvement in its research program.
    (b) An evaluation team, selected by the granting agency on the basis 
of the members' knowledge of water research and administration, shall 
evaluate each institute, and may with the concurrence of the granting 
agency, visit such institutes as it considers necessary. The team is to 
include at least one individual from each of the following categories:
    (1) Employees of the Department of the Interior;
    (2) University faculty or other professionals with relevant 
experience in the conduct of water resources research;
    (3) Former directors of water research institutes; and
    (4) University faculty or other professionals with relevant 
experience in information transfer.
    (c) The granting agency may request recommendations for team 
selections from the National Research Council/National Academy of 
Sciences and from other organizations whose members include the types of 
individuals cited in paragraph (b) of this section.
    (d) The granting agency shall, as an administrative cost, provide 
the funds for travel and per diem expense of the team members, within 
the maximum limits allowable under Federal travel regulations (41 CFR 
subtitle F).
    (e) The granting agency has the right to select dates for evaluation 
visits, and notice of the team's visit shall be provided to the 
institute being evaluated at least 60 days in advance.
    (f) It shall be the responsibility of each institute to provide such 
documentation of its activities and accomplishments as the granting 
agency and

[[Page 511]]

evaluation team may reasonably request. The request for this 
documentation shall be made at least 60 days prior to the due date of 
its receipt.
    (g) The team shall, within 90 days after completion of its 
evaluation, submit a written report of its findings to the granting 
agency for transmittal to the institute. If an institute is found to 
have deficiencies in meeting the objectives of the Act, it shall be 
allowed 1 year to correct them and to report such action to the granting 
agency. The decision as to the institute's eligibility to receive 
further funding will rest with the granting agency.
    (h) After the initial evaluation, each institute shall be 
reevaluated at least every 5 years.

[58 FR 27204, May 7, 1993]



PART 402--WATER-RESOURCES RESEARCH PROGRAM AND THE WATER-RESOURCES TECHNOLOGY DEVELOPMENT PROGRAM--Table of Contents




                           Subpart A--General

Sec.
402.1  Purpose.
402.2  Delegation of authority.
402.3  Definitions.
402.4  Information collection.
402.5  [Reserved]

           Subpart B--Description of Water-Resources Programs

402.6  Water-Resources Research Program.
402.7  Water-Resources Technology Development Program.
402.8--402.9  [Reserved]

      Subpart C--Application, Evaluation, and Management Procedures

402.10  Research project applications.
402.11  Technology-development project applications.
402.12  Evaluation of applications for grants and contracts.
402.13  Program management.
402.14  [Reserved]

                          Subpart D--Reporting

402.15  Reporting procedures.

    Source: 51 FR 20963, June 10, 1986, unless otherwise noted.

    Authority: Secs. 105 and 106, Pub. L. 98-242, 98 Stat. 97 (42 U.S.C. 
10304 and 10305).



                           Subpart A--General



Sec. 402.1  Purpose.

    The regulations in this part are issued pursuant to title I of the 
Water Resources Research Act of 1984 (Pub. L. 98-242, 98 Stat. 97), 
which authorizes appropriations to, and confers authority upon, the 
Secretary of the Interior to promote national programs of water-
resources research and technology development.



Sec. 402.2  Delegation of authority.

    The Water-Resources Research Program and the Water-Resources 
Technology Development Program, as authorized by sections 105 and 106 of 
the Act (42 U.S.C. 10304 and 10305), have been established as components 
of the USGS. The Secretary of the Interior has delegated to the Director 
of the USGS authority to take actions and make the determinations that, 
under the Act, are the responsibility of the Secretary.



Sec. 402.3  Definitions.

    (a) Grant is used in these rules as a generic term for a Federal 
assistance award, including project grants and cooperative agreements.
    (b) Act means the Water Resources Research Act of 1984 (Pub. L. 98-
242, 98 Stat. 97).
    (c) Educational institution means any educational institution--
privately and/or publicly owned.
    (d) Dollar-for-dollar matching grant means for each Federal dollar 
provided to support the projects, a non-Federal dollar also must be 
provided to the project.



Sec. 402.4  Information collection.

    The information-collection requirements contained in sections 
402.10, 402.11, and 402.15 have been approved by the OMB under 44 U.S.C. 
3501 et seq. and assigned clearance number 1028-0046. The application 
proposals being collected will contain technical information that will 
be used by the USGS as a basis for selection and award of grants. The 
progress reports being collected will contain a description of all work 
accomplished and results achieved on each funded project and will enable 
the USGS to carry out its

[[Page 512]]

oversight responsibilities and provide dissemination of technical 
information.
Sec. 402.5  [Reserved]



           Subpart B--Description of Water-Resources Programs



Sec. 402.6  Water-Resources Research Program.

    (a) Subject to the availability of appropriated funds, the Water-
Resources Research Program will provide support, in the form of a 
dollar-for-dollar matching grant, to educational institutions, private 
foundations, private firms, individuals, and agencies of local or State 
governments for research concerning any aspect of a water-resource 
related problem deemed to be in the national interest. Federal agencies 
are excluded from receiving matching grants. Grants may be awarded on 
other than a dollar-for-dollar matching basis in cases where the USGS 
determines that research on a high-priority subject is of a basic nature 
that otherwise would not be undertaken.
    (b) The types of research to be undertaken under this program are 
listed below, without indication of priority:
    (1) Aspects of the hydrologic cycle;
    (2) Supply and demand for water;
    (3) Demineralization of saline and other impaired waters;
    (4) Conservation and best use of available supplies of water and 
methods of increasing such supplies;
    (5) Water reuse;
    (6) Depletion and degradation of groundwater supplies;
    (7) Improvements in the productivity of water when used for 
agricultural, municipal, and commercial purposes; and
    (8) The economic, legal, engineering, social, recreational, 
biological, geographic, ecological, and other aspects of water problems.
    (9) Scientific information-dissemination activities, including 
identifying, assembling, and interpreting the results of scientific and 
engineering research on water-resources problems.
    (10) Providing means for improved communications of research 
results, having due regard for the varying conditions and needs for the 
respective States and regions.



Sec. 402.7  Water-Resources Technology Development Program.

    (a) Subject to the availability of appropriated funds, the Water-
Resources Technology Development Program will provide funds in the form 
of grants or contracts to educational institutions, private firms, 
private foundations, individuals, and agencies of local or State 
governments for technology development concerning any aspect of water-
related technology deemed to be of State, regional, and national 
importance, including technology associated with improvement of waters 
of impaired quality and the operation of test facilities. Federal 
agencies are excluded from receiving grants or contracts. The types of 
technology-development to be undertaken under this program shall include 
paragraphs 1 through 10 of Sec. 402.6(b).
    (b) The USGS may establish any condition for the matching of funds 
by the recipient of any grant or cost-sharing under a contract under the 
technology-development program which the USGS considers to be in the 
best interest of the Nation.
Secs. 402.8--402.9  [Reserved]



      Subpart C--Application, Evaluation, and Management Procedures



Sec. 402.10  Research-project applications.

    (a) Only those applications for grants that are in response to and 
meet the guidelines of specific USGS announcements will be considered 
for funding appropriated for this program.
    (b) The USGS program announcements will identify priorities, 
matching requirements, particular areas of interest, criteria for 
evaluation, OMB regulations as appropriate, assurances, closing date, 
and proposal submittal instructions. Program announcements may also 
include criteria for high-priority subjects of a basic nature that may 
be funded on other than a dollar-for-dollar basis. Program announcements 
will be distributed to names on the current USGS mailing list for the

[[Page 513]]

Water-Resources Research Program announcements, including new requests 
received in response to published notices of upcoming program 
announcements.
    (c) Notification of the availability of the program announcement 
will be published in the Commerce Business Daily and/or Federal 
Register.
    (d) The application for funds must be signed by an individual or 
official authorized to commit the applicant and it must contain:
    (1) A Standard Form 424 ``Federal Assistance,'' sections I and II 
completed by applicant, used as the cover sheet for each proposal.
    (2) A project summary of no more than one typed, single-spaced page 
providing the following specific information:
    (i) Identification of the water or water-related problems and the 
problem-solution approach;
    (ii) Identification of the proposed scientific contribution of the 
problem solution;
    (iii) Concise statement of the specific objectives of the project;
    (iv) Identification of the approach to be used to accomplish the 
work; and
    (v) Identification of potential users of the proposed work.
    (3) Narrative information, as specified in the published program 
announcement, such as project title, project objectives, background 
information, research tasks, methodology to conduct the research task, 
the relevancy of the proposed project to water-resources problems, 
qualifications of the principal investigators and their organizations, 
and proposed budget with supporting information sufficient to allow 
evaluation of costs.



Sec. 402.11  Technology-development project applications.

    (a) Grant awards will be used to support those portions of the 
program for which the principal purpose is other than as described in 
Sec. 402.11(b). Program announcements and applications will be governed 
by the same procedures provided in Sec. 402.10.
    (b) If it is determined that the principal purpose of a planned 
award (or awards) is to acquire goods or services for the direct benefit 
or use of the Government, the action must be regarded as a procurement 
contract. A competitive solicitation prepared in accordance with 
applicable acquisition regulations will be issued to interested parties. 
Notification of the availability of any contract solicitation will be 
published in the Commerce Business Daily, unless waived in accordance 
with Sec. 5.202 of the Federal Acquisition Regulation (FAR). Contracts 
may be awarded without full and open competition only if justified in 
accordance with FAR subpart 6.3.



Sec. 402.12  Evaluation of applications for grants and contracts.

    (a) Grants. (1) Each grant application will receive technical 
evaluations from Government and/or non-Government scientific or 
engineering personnel. Utilizing the criteria for evaluation identified 
in the applicable announcement, each reviewer will assign a technical 
score.
    (2) Grant applications with low technical ratings will be screened 
out, and the remaining grant applications will be rank-ordered by review 
panels.
    (3) USGS program officials will compile a single, consolidated rank-
ordered list of the grant applications based on technical scoring, 
program needs and published priorities, and the available Federal funds.
    (b) Contracts. Proposals for contract awards will be evaluated by a 
USGS panel. Contracts will be awarded according to procedures contained 
in the FAR, the Department of the Interior Acquisition Regulation, and 
in acquisition policy releases issued by the Department and by the USGS.



Sec. 402.13  Program management.

    (a) After the conclusion of negotiations, the USGS will transmit a 
grant or contract-award document, as appropriate, setting forth the 
terms of the award.
    (b) Grants. Recipients will be required to execute funded projects 
in accordance with OMB Circulars governing cost principles, 
administrative requirements, and audit, as applicable to their 
organization type. In addition, OMB Circular A-67, Coordination of 
Federal Activities in the Acquisition of Certain

[[Page 514]]

Water Data, is applicable to awards under these programs.
    (c) Contracts. Administrative requirements for performance of 
research contracts will be established in the contract clauses in 
conformance with applicable procurement regulations and other interior 
or USGS acquisition policy documents. OMB Circular A-67 will also apply 
to some contract awards under this program.
Sec. 402.14  [Reserved]



                          Subpart D--Reporting



Sec. 402.15  Reporting procedures.

    (a) Grantees or contractors will be required to submit the following 
technical reports to the USGS address identified under the terms and 
conditions of each award.
    (1) Quarterly Technical Progress Report. This report shall include a 
description of all work accomplished, results achieved, and any changes 
that affect the project's scope of work, time schedule, and personnel 
assignments.
    (2) Draft Technical Completion Report. The draft report will be 
required for review prior to submission of the final technical 
completion report.
    (3) Final Technical Completion Report. The final report and a 
camera-ready copy shall be submitted to the USGS within 90 days after 
the expiration date of the award and shall include a summary of all work 
accomplished, results achieved, conclusions, and recommendations. The 
camera-ready copy shall be prepared in a manner suitable for 
reproduction by a photographic process. Format will be specified in the 
terms and conditions of the award.
    (4) Final Report Abstract. A complete Water-Resources Scientific 
Information Center Abstract Form 102 and National Technical Information 
Service Form 79 shall be submitted with the final report.
    (b) Grantees or contractors will be required to submit financial, 
administrative, and closeout reports as identified under the terms of 
each award. Reporting requirements will conform to the procedures 
described in the Departmental Manual of the Department of the Interior 
at 505 DM 1-5.
    (c) Contracts for technology-development projects may also require 
delivery of hardware items produced and/or specifications, drawings, 
test results, or other data describing the funded technology.

[[Page 515]]



       CHAPTER VI--BUREAU OF MINES, DEPARTMENT OF THE INTERIOR




  --------------------------------------------------------------------

                      SUBCHAPTER A--HELIUM AND COAL
Part                                                                Page
601             Sales of helium by and rental of containers 
                    from the Bureau of Mines................         516
602             Helium distribution contracts...............         519
                       SUBCHAPTERS B--L [RESERVED]
  SUBCHAPTER M--RULES AND REGULATIONS FOR THE ADMINISTRATION OF GRANTS
652             Mining and Mineral Resources Research 
                    Institute Program.......................         532
653-699   [Reserved]

[[Page 516]]



                      SUBCHAPTER A--HELIUM AND COAL





PART 601--SALES OF HELIUM BY AND RENTAL OF CONTAINERS FROM THE BUREAU OF MINES--Table of Contents




Sec.
601.1  Purpose.
601.2  Definitions.
601.3  Contract application forms and procedures.
601.4  [Reserved].
601.5  Schedule of prices and charges.
601.6  Purchase price of helium.
601.7  Service charges.
601.8  Settlements under existing contracts.
601.9  Shipping containers.
601.10  [Reserved].
601.11  Applicability to Federal agencies.

    Authority: Pub. L. 86-777, approved Sept. 13, 1960, 74 Stat. 918 (50 
U.S.C. 167-167n).

    Source: 46 FR 37506, July 21, 1981, unless otherwise noted.



Sec. 601.1  Purpose.

    The purpose of this part 601 is to establish procedures governing 
the sale of helium and related services by the Bureau of Mines, and the 
rental of helium containers from the Bureau of Mines.



Sec. 601.2  Definitions.

    (a) Act means the Helium Act, Pub. L. 86-777, approved September 13, 
1960 (74 Stat. 918; 50 U.S.C. 167-167n).
    (b) [Reserved]
    (c) Helium plant means a facility operated by or for the U.S. Bureau 
of Mines for the production, purification, repurification, or shipment 
of helium.
    (d) Bureau means the Bureau of Mines of the Department of the 
Interior.
    (e) Purchaser means any individual, corporation, partnership, firm, 
association, trust, estate, public or private institution, state or 
political subdivision thereof, having a new (after revision of this 
part) helium purchase contract with the Bureau, and any agency of the 
U.S. Government, purchasing helium from the Bureau or using helium 
containers rented from the Bureau.
    (f) Grade-A helium means the grade of helium produced at the 
Bureau's helium plants, and is 99.995 percent pure helium, or better by 
volume.
    (g) Standard cubic foot (scf) is a
1-cubic foot volume of Grade-A helium measured at a pressure of 14.7 
pounds per square inch absolute and a temperature of 70 deg. Fahrenheit.
    (h) Cylinder means a standard-type cylinder of approximately 1.5 
cubic feet internal volume, designed for a filling pressure of 1,800 
pounds per square inch gage or more, which will stand vertically without 
external support with the center of the valve outlet not less than 50\1/
2\ inches nor more than 58\1/2\ inches above the floor, equipped with a 
standard-type cylinder valve, safety relief device, and valve-protective 
cap, or a similar cylinder acceptable to the Bureau as a standard type.
    (i) Valve means a standard-type cylinder valve acceptable to the 
Bureau of Mines having a valve outlet conforming to Specification No. 
580 or No. 350 as described by the latest edition of Compressed Gas 
Association, Inc., Pamphlet V-1, ANSI B57.1-1977; Provided, That at the 
Bureau's option, valves with outlets conforming to other specifications 
may be accepted as alternate standards.
    (j) Tank car means a railroad car permanently equipped with multiple 
tubes manufactured in accordance with 49 CFR 179.500.
    (k) Tube trailer means a road-type semitrailer without motive power 
permanently equipped with multiple tubes manufactured in accordance with 
49 CFR 178.36, 178.37, or 178.45.
    (l) Tube module means one or more seamless steel tubes, manufactured 
in accordance with 49 CFR 179.500, that by means of a framework are 
joined together to form a unit. Valves may be manifolded.
    (m) Liquid helium trailer means a special road-type semitrailer 
without motive power, equipped with a vacuum-jacketed container suitable 
for transporting 1,000 U.S. gallons or more of liquid helium. The 
container may be separable or an integral part of the chassis and 
dependent upon design, may or may not require a Department of 
Transportation (DOT) special permit for transporting.

[[Page 517]]

    (n) Liquid helium dewar (dewar) means a portable or skid-mounted, 
vacuum-jacketed container suitable for shipping less than 1,000 U.S. 
gallons of liquid helium.
    (o) Schedule of Prices and Charges (Schedule) means a listing of 
prices and charges for products and services provided under contract 
pursuant to this part.
    (p) Federal Agency is any department, independent establishment, 
commission, administration, foundation, authority, board, or bureau of 
the U.S. Government, or any corporation owned, controlled, or in which 
the U.S. Government has a proprietary interest, as these terms are 
defined in 5 U.S.C. 101-05; 5 U.S.C. 551(1); 5 U.S.C. 552(e); or in 18 
U.S.C. 6, but does not include Federal agency contractors.
    (q) Contracting officer is the person executing a contract on behalf 
of the Government, and includes any duly appointed successor.



Sec. 601.3  Contract application forms and procedures.

    (a) Any prospective helium purchaser may make application to the 
Bureau to become a purchaser of helium, and, if desired, rent containers 
from the bureau and, upon meeting the requirements of this part and upon 
execution of a purchase (and container rental) contract with the Bureau, 
may purchase helium (and rent containers) from the Bureau. To be 
eligible, a prospective purchaser must: demonstrate adequate financial 
resources to pay for helium and helium-related services in advance, hold 
a certificate of competency and/or a determination of eligibility from 
the Small Business Administration if the prospective purchaser is a 
small business concern and is determined to be nonresponsible and/or 
ineligible by the contracting officer, and be otherwise qualified and 
eligible to enter into a Bureau contract under applicable laws and 
regulations.
    (b) The information collection requirement contained in this 
paragraph has been approved by the Office of Management and Budget under 
44 U.S.C. 3507 and assigned clearance number 1032-0111. The information 
is being collected to identify firms desiring to enter into a contract. 
This information will be used to complete contract documents and 
establish cash advance required. The obligation to respond is required 
to obtain a benefit.
    (c) The contract shall include, among other things, duties and 
responsibilities of the parties, definitions, term, minimum contract 
volume, and other conditions, such as advance payments, deposits, surety 
bonds, repurchase rights of the Government, liabilities, reservations 
with respect to sales and deliveries, power of inspection, notification 
to repurchasers, violations and penalties, cancellation and assignment 
of contract, termination, general provisions, and standard provisions.
    (d) Application forms are available upon written request from 
Division of Helium Operations, 1100 S. Fillmore St., Amarillo, Texas 
79101. Applicable contract form(s) and Schedule will be included for 
examination by the prospective purchaser.
    (e) Upon approval by the Contracting Officer of the returned 
application, the contract will become effective when executed by both 
parties.
Sec. 601.4  [Reserved]



Sec. 601.5  Schedule of prices and charges.

    (a) The Schedule of Prices and Charges (Schedule) is published by 
the Bureau of Mines, Division of Helium Operations, and is periodically 
updated. The Schedule is available upon request from the Division of 
Helium Operations, 1100 S. Fillmore St., Amarillo, Texas 79101, 
telephone 806-376-2638 or FTS 735-1638. The Schedule shows prices and 
charges for helium, ordinary related services, use or rental of Bureau-
owned helium containers or equipment, cash advance, and deposit 
required, and bonds and/or insurance to guarantee return of containers.
    (b) Terms and conditions under which products and services can be 
acquired under contract pursuant to this part are shown in appendix 1 to 
the Schedule. The terms and conditions are reviewed at least annually, 
and are revised as required.
    (c) Revisions to the Schedule are determined at least annually by 
the Division of Helium Operations in accordance with Office of 
Management and

[[Page 518]]

Budget (OMB) Circular No. A-25, as revised. In no case will a revised 
Schedule become effective in less than 30 days after date of 
distribution to all Bureau helium customers known at the time of 
distribution.



Sec. 601.6  Purchase price of helium.

    (a) The purchase price of Grade-A helium shipped f.o.b. origin shall 
be the price stated in the Schedule that is in effect on the date the 
helium is shipped from the helium plant.
    (b) [Reserved]
    (c) The purchase price of Grade-A helium shipped f.o.b. destination 
shall be the price stated in the Schedule that is in effect on the date 
the helium is shipped from the helium plant plus any service charges, 
container charges, transportation charges, and other charges incurred in 
making such delivery. Delivery of helium f.o.b. destination is made only 
in Bureau-furnished containers.



Sec. 601.7  Service charges.

    In addition to the purchase price of helium, the following charges 
for services and use of equipment rented from the Bureau shall be paid 
by the purchaser.
    (a) For filling containers. The charge for filling helium containers 
shall be as shown in the Schedule that is in effect on the date the 
helium is shipped from the helium plant.
    (b) For ordinary work performed on containers supplied by the 
purchaser and for ordinary services performed in connection with 
shipment of helium from a helium plant. The charge for ordinary work 
shall be as shown in the Schedule that is in effect on the date the work 
is performed.
    (c) For extraordinary expenses. Such expenses incurred in connection 
with any contract or delivery for which prices are not stated in the 
effective Schedule including, but not limited to, costs of work on 
purchaser's containers, filling, servicing, and rental of containers of 
types other than those stated in the effective Schedule, purifying 
helium beyond normal plant purity, (delete ``liquefying helium'') 
analytical services, shipment of helium from other than a helium plant 
selected by the Bureau, and unusual handling, transportation, and 
communications, may be determined by the Bureau and charged to the 
purchaser as they arise on the basis of the cost of rendering the 
services, making due allowance for contingencies, overhead expense, and 
commercial common-carrier rates.
    (d) For use of helium containers supplied by the Bureau. The charge 
for use of each Bureau-supplied container shall be as shown in the 
Schedule in effect on the date of shipment from a helium plant.



Sec. 601.8  Settlements under existing contracts.

    Contracts for the purchase of helium or for the rent of Bureau-owned 
shipping containers which are in effect on the effective date of the 
amended regulations in this part shall remain in effect, subject to the 
terms and conditions of the amended regulations in this part, for a 
period of not more than 90 days after the effective date of these 
amended regulations or until replaced by new contract or contracts as 
described in these amended regulations, should such replacement occur 
prior to expiration of the 90 days. In the event that purchaser does not 
enter into replacement contract or contracts within 90 days after 
effective date of these regulations, the existing contract(s) shall 
terminate and purchaser shall pay any sums due Bureau under terms of the 
contracts and shall return any Bureau-owned shipping containers 
outstanding under any container rent contract so terminated.



Sec. 601.9  Shipping containers.

    (a) Containers may be provided by the purchaser or the Bureau. The 
purchaser may provide containers or may request the Bureau to provide 
them under contract. Containers provided by the purchaser must be 
satisfactory to the Bureau in all respects, must be free internally from 
oil or water, and shall comply with the requirements for shipment in 
interstate commerce. The Bureau will not use or fill any container which 
in its opinion is unsafe or unsuitable.
    (b) Provisions applicable to all types of containers supplied by the 
Bureau. Specific provisions for all types of containers, such as, 
cylinders, tank cars, tube

[[Page 519]]

trailers, tube modules, liquid helium trailers, and liquid helium 
dewars, are detailed in the container rental contract and the Schedule.
Sec. 601.10  [Reserved]



Sec. 601.11  Applicability to Federal Agencies.

    The regulations in this part are applicable to Federal agencies 
procuring helium or services from Bureau or using containers furnished 
by Bureau; except that Federal agencies shall not be required to: (a) 
enter into contracts for the purchase of helium or lease of containers, 
(b) furnish advance payments, or (c) provide surety for the return of 
containers or payment of bills.



PART 602--HELIUM DISTRIBUTION CONTRACTS--Table of Contents




Sec.
602.1  Purpose.
602.2  Definitions.
602.3  Bureau helium distribution contracts.

Appendix to Part 602

    Authority: The Helium Act of 1960, Pub. L. 86-777 (50 U.S.C. 167, et 
seq.); 5 U.S.C. 301.

    Source: 46 FR 60436, Dec. 10, 1981, unless otherwise noted.



Sec. 602.1  Purpose.

    The purpose of this part 602 is to establish procedures governing 
distribution of Bureau of Mines helium by a system of authorized private 
helium distributors. To the same end, the regulations prescribe certain 
requirements that must be met by private helium distributors under new 
contracts, entered into with the Bureau of Mines with an effective date 
of January 15, 1982, or later, to distribute Bureau of Mines helium.



Sec. 602.2  Definitions.

    As used in this part--
    (a) Helium Act means Pub. L. 86-777, 74 Stat. 918 (50 U.S.C. 167-
167n).
    (b) Helium means the element helium regardless of its physical 
state.
    (c) Bureau of Mines helium or Bureau helium is helium, regardless of 
physical state or purity, available for purchase or purchased from the 
Secretary or a Bureau helium distribution contractor after the effective 
date of this revision of 30 CFR part 602. Bureau helium cannot be 
obtained from any other source of supply. Bureau of Mines helium 
includes volumes of helium available for delivery or delivered to the 
purchaser or Bureau helium distribution contractors in the Grade-A 
gaseous physical state or liquid physical state, and volumes of Grade-A 
gaseous helium used as raw stock to produce (1) liquid helium, and the 
liquid produced therefrom, (2) a gaseous or liquid mixture having a 
purity of helium different from Grade-A, (3) a gaseous or liquid mixture 
having a concentration of helium-4 isotope different from the 
concentration of such isotope in Grade-A helium, and (4) helium mixtures 
different in any other way from Grade-A gaseous helium. Bureau helium 
does not include private helium stored under contract with the Bureau 
and redelivered to the private enterprise in crude, Grade-A gaseous, or 
liquid helium form.
    (d) Grade-A helium means the grade of helium produced at the 
Bureau's helium plants, and it is 99.995 percent pure helium or better, 
by volume.
    (e) Federal agency means any department, independent establishment, 
commission, administration, foundation, authority, board, or bureau of 
the U.S. Government, or any corporation owned, controlled, or in which 
the U.S. Government has a proprietary interest, as these terms are 
defined in 5 U.S.C. 101-105; 5 U.S.C. 551 (1); 5 U.S.C. 552(e); or in 18 
U.S.C. 6, but does not include Federal agency contractors.
    (f) Bureau helium distribution contractor is a private helium 
merchant (as defined by the Texas Business and Commercial Code Ann., 
title 1, sec. 2.104 (Uniform Commercial Code)) that, by new contract 
with an effective date of January 15, 1982, or later with the Bureau, 
has Bureau helium available for distribution.
    (g) Private helium purchaser means any individual, corporation, 
partnership, firm, association, trust, estate, public or private 
institution, state or political subdivision thereof, purchasing or 
wanting to purchase helium. The term does not include Federal agencies, 
but does include Federal agency contractors.

[[Page 520]]

    (h) Helium requirement or requirement of helium is all helium, 
regardless of physical state or in mixture with other gases, that is 
required by or delivered to a Federal agency to accomplish an objective, 
project, mission, or program of the Federal agency.
    (i) Major helium requirement or major requirement of helium is a 
helium requirement or delivery of 5,000 standard cubic feet (scf), 
measured at 14.7 pounds per square inch absolute pressure and 70 deg. 
Fahrenheit temperature, or more, including liquid helium gaseous 
equivalent, during a calendar month, including the first 5,000 scf per 
calendar month when the ``helium requirement'' equals or exceeds 5,000 
scf per calendar month.
    (j) Secretary is the Secretary of the Department of the Interior.
    (k) Bureau is the Bureau of Mines of the U.S. Department of the 
Interior.



Sec. 602.3  Bureau helium distribution contracts.

    (a) Any private helium merchant may make application to the Bureau 
to become a Bureau helium distribution contractor and, upon meeting the 
requirements of this part and upon execution of a three-year 
distribution contract with the Bureau, may become a Bureau helium 
distribution contractor. To be eligible, a prospective contractor must 
demonstrate: adequate financial resources to pay for Bureau helium and 
helium-related services in advance, adequate facilities and equipment to 
meet delivery schedules and quality standards required by purchasers of 
Bureau helium, a satisfactory record of performance in the distribution 
of helium, and/or other compressed gases, a certificate of competency 
and/or a determination of eligibility from the Small Business 
Administration if the prospective contractor is a small business concern 
and is determined to be nonresponsible and/or ineligible by the 
contracting officer, and be otherwise qualified and eligible to receive 
an award of a Bureau helium distribution contract under applicable laws 
and regulations. Effective January 15, 1982, and thereafter, only those 
helium merchants having a valid Bureau helium distribution contract 
shall be included on Bureau lists of Bureau helium distribution 
contractors. (The currently approved helium distribution contract is set 
out in the Appendix to this part.)
    (b) The information collection requirements contained in this 
section have been approved by the Office of Management and Budget under 
44 U.S.C. 3507 and assigned clearance number 1032-0113. The information 
is being collected to identify firms desiring to become helium 
distribution contractors. This information will be used to determine 
responsible applicants as possible contractors, to establish an 
accountability of helium transfer between distributors, and to report 
distributor annual sales, transfers, and purchases of Bureau of Mines 
helium as certification of compliance with 30 CFR 602. The obligation to 
respond is required to obtain a benefit.
    (c) Bureau helium distribution contracts shall require the Bureau 
helium distribution contractor to deliver only Bureau helium to supply 
(1) major helium requirements of any Federal agency, whether or not 
Bureau helium is specified by the agency, and (2) any helium requirement 
of any Federal agency if procurement documents in any manner specify or 
evidence intent to acquire Bureau helium. Information about which 
Federal agencies have major helium requirements is available from Bureau 
of Mines Division of Helium Operations, 1100 S. Fillmore St., Amarillo, 
Texas 79101, telephone 806 376-2638 or FTS 735-1638.
    (d) Bureau helium distribution contracts shall also require the 
Bureau helium distribution contractor to deliver only Bureau helium to:
    (1) Any private helium purchaser, including Federal agency 
contractors, if procurement documents in any manner specify or evidence 
intent to acquire Bureau helium, or
    (2) Another Bureau helium distribution contractor if certification 
as Bureau helium is required or furnished.
    (e) Contracts shall include provisions for sources of supply of 
Bureau helium, quantity, quality, delivery requirements, Bureau helium 
book inventory, actual physical volume of helium in inventory, 
commingling, accounting and reporting procedures, records and facilities 
examinations, shipping points, payments, and contract termination.

[[Page 521]]

                          Appendix to Part 602

    Bureau Helium Distribution Contract No. 14-09-0060 ------- Between 
United States Department of the Interior, Bureau of Mines and ------

                                Contents

Preamble
Article I, Definitions
Article II, Term of Contract
Article III, Bureau Helium Distribution Contractor
Article IV, Bureau of Mines
Article V, Conditions
Article VI, General Provisions
Addendum ``A''--Application
Addendum ``B''--Certificate of Resale of Bureau of Mines Helium (Form 
HA-285a)
Addendum ``C''--Bureau of Mines Helium: Stocks, Receipts, and 
Distribution Annual Report (Form 6-1575-A(1-77) Rev.)

                       Bureau Helium Distribution

                                Contract

    This contract, made this ---- day of ------, 19--, pursuant to the 
Helium Act (Act of 1960, Pub. L. 86-777, 74 Stat. 918, 50 U.S.C. 167 et 
seq., 5 U.S.C. 301), between the United States of America, Department of 
the Interior, Bureau of Mines, hereinafter styled Bureau of Mines, 
represented by the officer executing this contract, and ------------ 
whose principal address is ------------ hereinafter styled Bureau Helium 
Distribution Contractor, or Contractor.
    Witnesseth that:
    Whereas, pursuant to provisions of the Helium Act: ``The Department 
of Defense, the Atomic Energy Commission, and other agencies of the 
Federal Government, to the extent that supplies are readily available, 
shall purchase all major requirements of helium from the Secretary,'' 
(of the Department of the Interior);
    Whereas, the Bureau of Mines, by virtue of authority delegated by 
the ``Secretary'' (of the Department of the Interior) under the Helium 
Act administers the production and distribution of helium for Federal 
use;
    Whereas, the authorization of private helium merchants to 
participate in the distribution of Bureau of Mines helium for Federal 
use is advantageous to both the United States Government and the private 
helium merchants; and
    Whereas, an application to become a Bureau Helium Distribution 
Contractor, attached to and forming a part of this contract (Addendum 
A), has been received by the Bureau of Mines from the private helium, 
merchant named as a party to this contract.
    Now Therefore, in consideration of the mutual and dependent 
covenants herein contained, it is mutually agreed between the parties as 
follows:
    Article I--Definitions
    1.1  Bureau helium distribution contractor is a private helium 
merchant (as defined by the Texas Business and Commercial Code Ann., 
Title 1, Sec. 2.104 (Uniform Commercial Code)) that by new contract with 
an effective date of January 15, 1982, or later with the Bureau, has 
Bureau helium available for distribution.
    1.2  Bureau is the Bureau of Mines of the United States Department 
of the Interior.
    1.3  Bureau of Mines helium or Bureau helium is helium, regardless 
of physical state or purity, available for purchase or purchased from 
the secretary or another Bureau helium distribution contractor after the 
effective date of this contract. Bureau helium cannot be obtained from 
any other source of supply. Bureau of Mines helium includes volumes of 
helium available for delivery or delivered to purchasers or Bureau 
helium distribution contractors in the Grade-A gaseous physical state or 
liquid physical state and volumes of Grade-A gaseous helium used as raw 
stock to produce (1) liquid helium and the liquid produced therefrom, 
(2) a gaseous or liquid mixture having a purity of helium different from 
Grade-A, (3) a gaseous or liquid mixture having a concentration of 
helium-4 isotope different from the concentration of such isotope in 
Grade-A helium, and (4) helium mixtures different in any other way from 
Grade-A gaseous helium. Bureau helium does not include private helium 
stored under contract with the Bureau and redelivered to the private 
enterprise (owner) in crude Grade-A gaseous, or liquid helium form.
    1.4  Contracting officer is the person executing this contract on 
behalf of the Government and includes a duly appointed successor or 
authorized representative.
    1.5  Federal agency is any department, independent establishment, 
commission, administration, foundation, authority, board, or bureau of 
the United States Government, or any corporation owned, controlled, or 
in which the United States Government has a proprietary interest, as 
these terms are defined in 5 U.S.C. 101-05; 5 U.S.C. 551(1); 5 U.S.C. 
552(e); or in 18 U.S.C. 6, but does not include Federal agency 
contractors.
    1.6  Federal Agency Contractor is any individual, corporation, 
partnership, firm, association, trust, estate, public or private 
institution, or a State or political subdivision thereof which has 
entered into or that is obligated by a contract or cooperative agreement 
with a Federal agency, or received a grant from a Federal agency, or 
which subcontracts with a Federal Agency Contractor.
    1.7  Private helium purchaser means any individual, corporation, 
partnership, firm, association, trust, estate, public or private 
institution, state or political subdivision thereof, purchasing or 
wanting to purchase helium. The term does not include Federal

[[Page 522]]

agencies, but does include Federal agency contractors.
    1.8  Helium is the element helium regardless of its physical state.
    1.9  Helium requirement or requirement of helium is all helium, 
whether in the gaseous or liquid state or in mixtures with other gases, 
that is required by or delivered to a Federal agency, to accomplish an 
objective, project, mission, or program of the Federal agency.
    1.10  Major helium requirement or major requirement of helium is a 
helium requirement of 5,000 scf or more during a calendar month, 
including the first 5,000 scf per calendar month when the ``helium 
requirement'' equals or exceeds 5,000 scf per calendar month.
    1.11  Secretary is the Secretary of the Deparrment of the Interior.
    1.12  Shipping point is a shipping facility of the Bureau Helium 
Distribution Contractor from which Bureau of Mines helium is available.
    1.13  Standard cubic foot (scf) is a 1-cubic-foot volume of Grade-A 
helium measured at a pressure of 14.7 pounds per square inch absolute 
and a temperature of 70 deg. Fahrenheit. Volumes of liquid helium shall 
be expressed in liters or U.S. gallons. One liter of liquid helium is 
equivalent to 26.63 standard cubic feet of gaseous helium. One U.S. 
gallon of liquid helium is equivalent to 100.8 standard cubic feet of 
gaseous helium. One pound of liquid helium is equivalent to 96.67 
standard cubic feet of gaseous helium. Appropriate Grade-A gaseous 
equivalents of volumes of helium mixtures different in any way from 
Grade-A gaseous helium may be used, and such equivalents must be used 
when required by the Division of Helium Operations, Bureau of Mines, 
Amarillo, Texas.
    1.14  Grade-A helium means the grade of helium produced at the 
Bureau's helium plants, and it is 99.995 percent pure helium or better, 
by volume.

                      Article II--Term of Contract

    2.1  This contract shall be effective on the date heretofore stated 
and shall remain effective for a period of three (3) years thereafter 
unless sooner terminated as hereinafter provided in section 6.2 or for 
default.

           Article III--Bureau Helium Distribution Contractor

    3.1  The Bureau Helium Distribution Contractor (hereafter styled 
Contractor) shall deliver only Bureau of Mines helium to supply: (1) 
major helium requirements of a Federal agency without regard as to 
whether or not Bureau of Mines helium is specified by the agency, (2) 
any quantity of helium to a Federal agency if procurement documents 
specify in any manner that Bureau of Mines helium be furnished, (3) any 
quantity of helium to private helium purchasers if procurement documents 
specify in any manner the intent that Bureau of Mines helium be 
furnished, (4) any quantity of helium to another Bureau helium 
distribution contractor if certification as Bureau of Mines helium is 
required or furnished.
    3.2  Helium delivered for Federal use under the terms of this 
contract shall conform to the quality, quantity, and delivery 
requirements agreed to between the Contractor and the purchasing Federal 
Agency or private helium purchaser.
    3.3  Each delivery of helium that requires Bureau of Mines helium in 
accordance with Sec. 3.1 of this contract shall be made only from an 
inventory of Bureau of Mines helium on hand except as provided in Sec. 
3.4 of this contract.
    3.4  Helium is a fungible commodity; therefore, the Contractor may 
commingle Bureau of Mines helium with helium from other sources. For 
purposes of Bureau helium accounting records, as much of the 
Contractor's helium inventory will be considered Bureau of Mines helium 
as is equal to the volume of: (1) helium purchased from the Bureau of 
Mines and delivered to the Contractor, plus (2) helium delivered to the 
Contractor by another Bureau helium distribution contractor and 
certified as Bureau of Mines helium in accordance with Sec. 3.11 of this 
contract, less (3) helium deliveries in accordance with Sec. 3.1 of this 
contract. The Contractor may, except as restricted by Sec. 3.6 of this 
contract, sell as Bureau of Mines helium volumes of helium from its 
inventory even though its inventory does not contain, at the time of 
sale, sufficient helium purchased from the Bureau of Mines or helium 
received from and certified as Bureau of Mines helium by another Bureau 
helium distribution contractor to meet the Bureau of Mines helium 
requirements of the purchaser; however, the Contractor shall report such 
sales as sales of Bureau of Mines helium and shall, within thirty (30) 
calendar days following the end of a reporting period or discovery of a 
negative inventory of Bureau of Mines helium, whichever is sooner, place 
a firm procurement order with the Bureau of Mines or another Bureau 
helium distribution contractor for sufficient Bureau of Mines helium to 
restore its Bureau of Mines helium inventory to a positive value. 
Failure to order sufficient helium within the thirty (30) day period 
shall be sufficient grounds to terminate this contract for cause, 
according to Sec. 3.7.
    3.5  The Contractor's opening inventory of Bureau of Mines helium on 
its initial report to the Bureau shall be any Bureau of Mines helium 
received and not delivered in accordance with the provisions of this 
contract within the thirty (30) day period immediately preceding the 
effective date of this contract, except that, in the event that the 
Contractor was an Eligible Private Helium Distributor at the time of 
entering into this

[[Page 523]]

contract, opening inventories under this contract will be determined by 
the Bureau of Mines based on the Eligible Distributor's reports for the 
previous reporting periods and examination of Eligible Distributor's 
helium accounting records by a Bureau representative.
    3.6  The inventory balance of Bureau helium at the end of an annual 
reporting period may be carried forward as the opening inventory for the 
subsequent period, provided, however, that at no time shall the 
inventory of Bureau helium exceed the total volume of helium in physical 
inventory.
    3.7  At the end of each annual reporting period, the Contractor 
shall have a positive or zero balance of Bureau of Mines helium in its 
inventory. Negative closing balances of Bureau of Mines helium at the 
end of the annual reporting period, whether reported by the Contractor 
on its ``Bureau of Mines Helium'' (Addendum C), or revealed through 
Bureau of Mines examination of the Contractor's Bureau helium accounting 
records, if not changed to a positive value within thirty (30) days 
according to Sec. 3.4, shall be sufficient cause for termination of this 
contract.
    3.8  The Contractor shall not add or delete shipping points 
designated in the original application (Addendum A) except through 
amendment of this contract. The Contracting Officer, upon receipt of a 
written request from the Contractor to amend the contract to add or 
delete shipping points, along with a full explanation of the reason 
therefor, may send a contract amendment to the Contractor for execution 
or notify the Contractor of rejection of the request.
    3.9  The Contractor shall keep Bureau helium accounting records 
necessary to show compliance with this contract. Such records shall be 
kept in a central location and shall be retained for one (1) year 
following the last day of the applicable annual reporting period. Helium 
accounting records shall include but are not limited to the following: 
(1) records of sales of Bureau of Mines helium to each Federal agency 
and to each private helium purchaser, (2) all pertinent documents 
supporting sales of Bureau of Mines helium, (3) helium sales contracts 
between the Contractor and another Federal Agency Contractor who, in the 
opinion of the Contracting Officer, may reasonably be considered a 
Federal Agency Contractor, (4) all pertinent documents supporting any 
contention that a Federal Agency Contractor was not required to use 
Bureau of Mines helium to meet the requirements of a Federal Agency, or 
a Federal Agency Contractor whose order intended delivery of Bureau of 
Mines helium in the opinion of the Contracting Officer, (5) certificates 
of Resale of Bureau of Mines helium certifying the resale of helium as 
required by Sec. 3.11 of this contract.
    3.10  The Contracting Officer or his duly authorized representative 
shall have access to and the right to examine, during the Contractor's 
normal business hours, any pertinent books, documents, records, and 
physical facilities involving transactions related in any way to this 
contract.
    3.11  Sales of Bureau of Mines helium to another Bureau helium 
distribution contractor shall be certified on a ``Certificate of Resale 
of Bureau of Mines Helium'' as illustrated in Addendum B to this 
contract. The original of the Certificate shall be furnished to the 
buyer. The Contractor shall submit a fully executed copy of each 
Certificate issued during a reporting period with its annual report of 
``Bureau of Mines Helium.'' One copy of each Certificate issued shall be 
retained in the Central Bureau helium accounting records of the 
Contractor.
    3.12  Receipts of Bureau of Mines helium from another Bureau helium 
distribution contractor shall be substantiated by the original 
``Certificate of Resale of Bureau of Mines Helium'' executed and issued 
by the selling Bureau helium distribution contractor at the time of the 
sale and retained in the buying contractor's Bureau helium accounting 
records according to Sec. 3.9(5). The buying contractor shall submit a 
copy of each original Certificate received during a reporting period 
with its annual report of ``Bureau of Mines Helium,'' (Addendum C). No 
claimed receipt of Bureau of Mines helium from another Bureau helium 
distribution contractor will be allowed on an annual report unless fully 
supported by copies of valid Certificates.
    3.13  The Form No. 6-1575-A Rev., ``Bureau of Mines Helium'' 
attached as Addendum C to this contract, shall be used by the Contractor 
to report the stocks, receipts, and distribution of Bureau of Mines 
helium. The required reporting period is January 1 through December 31 
of each calendar year. The reports are due at the Bureau of Mines office 
indicated below on or before the thirtieth (30th) day of January of each 
year following the applicable preceding reporting period. The completed 
forms shall be submitted to the Department of the Interior, Bureau of 
Mines, Division of Helium Operations, 1100 S. Fillmore St., Amarillo, 
Texas 79101. Copies of the blank form may be obtained from the above 
address.

                       Article IV--Bureau of Mines

    4.1  The Bureau of Mines will place the Contractor's name, address, 
and locations of designated shipping points on the Bureau of Mines list 
of Bureau Helium Distribution Contractors.
    4.2  The Bureau of Mines will furnish its list of Bureau Helium 
Distribution Contractors to known users of Bureau of Mines Helium, and 
to other parties upon request, for their use in obtaining Bureau of 
Mines helium.

[[Page 524]]

(526
    4.3  The Bureau of Mines authorizes the Contractor to sell and 
distribute Bureau of Mines helium in accordance with the provision of 
this contract and to compete in the open market for such sales of Bureau 
of Mines helium that are otherwise reserved to the Secretary of the 
Department of the Interior.
    4.4  The Bureau of Mines will furnish, upon request by the 
contractor, information as to which Federal agencies have major helium 
requirements.

                          Article V--Conditions

    5.1  Repurchase rights. The Bureau of Mines shall have the right to 
repurchase from the original purchaser helium that has been sold by the 
Bureau and that has not been resold, lost or dissipated, when needed for 
United States Government use, as provided in Sec. 6(e) of the Helium 
Act. However, small volumes of Bureau helium purchased by the Contractor 
from another Bureau helium distribution contractor shall not be subject 
to repurchase by the Bureau.
    5.2  Liability
    (a) The Bureau of Mines warrants the quality and quantity of helium 
delivered to the original purchaser only and assumes no further 
liability, financial or otherwise, in connection with any sale or 
delivery of helium hereunder, including but not limited to claims 
relating to: (1) losses on business transactions or commitments between 
original purchaser and third parties, such as the Contractor, (2) losses 
on original purchaser's helium containers filled by the Bureau, or (3) 
losses occasioned by transportation delays.
    (b) Contractor shall be liable for any and all actual damages to the 
Government caused by Contractor, Contractor's representatives, or 
Contractor's owned or leased equipment.
    (c) Contractor is hereby advised that helium requirements of the 
United States Government shall have priority over non-Government 
requirements and that such priority requirements of the Government or 
occasions of Force Majeure may cause delay or deferral of shipment of 
any helium ordered by Contractor from the Bureau of Mines or another 
Bureau helium distribution contractor under this contract.

                     Article VI--General Provisions

    6.1  This contract cannot be assigned or otherwise transferred 
without the express written approval of the Contracting Officer.
    6.2  This contract may be terminated at any time by either party by 
serving not less than sixty (60) days' written notice of termination 
upon the other party, stating therein the date that such termination 
shall be effective. In the event of contract termination under the 
provisions of this Sec. 6.2, a report of receipts and distribution of 
Bureau of Mines helium, as required by Sec. 3.13 of this contract, shall 
be submitted for the period from January 1 to the effective date of the 
termination in the calendar year in which the termination occurs within 
15 days after the effective date of the termination.
    6.3  Disputes
    (A) Except as otherwise provided in this contract, any dispute 
concerning a question of fact arising under this contract which is not 
disposed of by agreement shall be decided by the Contracting Officer, 
who shall reduce his decision to writing and mail or otherwise furnish a 
copy thereof to the Contractor. The decision of the Contracting Officer 
shall be final and conclusive unless, within 30 days from the date of 
receipt of such copy, the Contractor mails or otherwise furnishes to the 
Contracting Officer a written appeal addressed to the Secretary. The 
decision of the Secretary or his duly authorized representative for the 
determination of such appeals shall be final and conclusive unless 
determined by a court of competent jurisdiction to have been fraudulent, 
or capricious, or arbitrary, or so grossly erroneous as necessarily to 
imply bad faith, or not supported by substantial evidence. In connection 
with any appeal proceeding under this clause, the Contractor shall be 
afforded an opportunity to be heard and to offer evidence in support of 
its appeal. Pending final decision of a dispute hereunder, the 
Contractor shall proceed diligently with the performance of the contract 
and in accordance with the Contracting Officer's decision.
    (b) This ``Disputes'' clause does not preclude consideration of law 
questions in connection with decisions provided for in Sec. 6.3.a above, 
Provided, That nothing in this contract shall be construed as making 
final the decision of any administrative official, representative, or 
board on a question of law.

                           Standard Provisions

    The remainder of the contract is comprised of nine standard 
provisions as follows:
6.4  Officials Not to Benefit
6.5  Covenant Against Contingent Fees
6.6  Utilization of Small Business Concerns
6.7  Utilization of Labor Surplus Area Concerns
6.8  Utilization of Minority Business Enterprises
6.9  Equal Opportunity
6.10  Affirmative Action for Handicapped Workers
6.11  Affirmative Action for Disabled Veterans and Veterans of the 
Vietnam Era
6.12  Clean Air and Water
    In witness whereof, the parties hereto have caused this contract to 
be fully executed in duplicate by their proper officers the day and year 
first above written.

United States of America, Department of the Interior, Bureau of Mines.

[[Page 525]]

By______________________________________________________________________

                          Contracting Officer.

Bureau Helium Distribution Contractor.
_______________________________________________________________________
(Name of Individual or Company)
By______________________________________________________________________
(Signature)
Title___________________________________________________________________
    (The following is to be executed if Contractor is a Corporation.)
    I, the undersigned, hereby certify that I am the ------------ 
Secretary of the above-named corporation; that the officer who signed 
this contract on behalf of such corporation was then acting in the 
capacity indicated; and that the records of the corporation, of which I 
have custody, indicate that such officer has the authority to so bind 
the corporation and that such authority is within the scope of its 
corporate power, and has not been revoked.
_______________________________________________________________________
(Signature)
    (Affix Corporate Seal)

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                       SUBCHAPTERS B--L [RESERVED]





  SUBCHAPTER M--RULES AND REGULATIONS FOR THE ADMINISTRATION OF GRANTS





PART 652--MINING AND MINERAL RESOURCES RESEARCH INSTITUTE PROGRAM--Table of Contents




Sec.
652.1  Scope.
652.2  Objectives.
652.3  Authority.
652.4  Administration.
652.5  Definitions.
652.6  Eligibility.
652.7  Responsibilities of institutions designated as mineral 
          institutes.
652.8  Applications for allotment grants.
652.9  Generic mineral technology centers.
652.10  Application for research grants.
652.11  Transfers of research and allotment grant funds.
652.12  Governing provisions for grants.
652.13  Reports.
652.14  Information collection.
652.15  Advisory committee.
652.16  Site visits.
652.17  Grant modifications.
652.18  Grant reduction and termination.

    Authority: 30 U.S.C. 1221-1230; Pub. L. 98-409; Pub. L. 100-483.

    Source: 54 FR 38378, Sept. 18, 1989, unless otherwise noted.



Sec. 652.1  Scope.

    This part sets forth policies and procedures for the assistance of 
institutions of higher learning that have been designated as State 
Mining and Mineral Resources Research Institutes and for the support of 
mining and mineral resources research at these institutions through 
specialized generic mineral technology research centers.



Sec. 652.2  Objectives.

    The objectives of the assistance provided by the Mining and Mineral 
Resources Research Institute program are:
    (a) To support research and training in mining and mineral resources 
problems related to the mission of the Department of the Interior;
    (b) To improve the advanced training of mineral scientists and 
engineers through grants which encourage State and industry support of 
mineral education;
    (c) To support, and encourage support of, research centers of 
generic expertise in mineral technology;
    (d) To assist the States in carrying on the work of competent and 
qualified mining and mineral resources research institutes; and
    (e) To provide support for graduate and postdoctoral students in 
mining and mineral resources disciplines including mining engineering, 
extractive metallurgy, geology, reclamation, engineering, economics, 
chemistry, physics, biology, ecology, and others.



Sec. 652.3  Authority.

    The authority for this program is the Mining and Mineral Resources 
Research Program Act of 1984 and the Mining and Mineral Resources 
Research Institute Amendments of 1988.
    (a) 30 U.S.C. 1221 authorizes the Secretary to make grants to assist 
States on a matching basis in carrying on the work of competent and 
qualified mining and mineral resources research institutes.
    (b) 30 U.S.C. 1222 authorizes the Secretary to make grants to the 
institutes for specific research and demonstration projects, and for 
research into any aspects of mining and mineral resources problems 
related to the mission of the Department of the Interior deemed 
desirable and not otherwise under study.
    (c) 30 U.S.C. 1229 authorizes the Secretary to appoint an Advisory 
Committee on Mining and Mineral Resources Research jointly chaired by 
the Assistant Secretary of the Interior responsible for minerals and 
mining and a committee member elected by the Committee from among those 
members who are not Federal employees.



Sec. 652.4  Administration.

    Responsibility for administration of the Mining and Mineral 
Resources Research Institute Program is assigned to the Director of the 
Bureau of Mines

[[Page 533]]

and subject to the supervisory authority of the Assistant Secretary to 
whom he/she reports.



Sec. 652.5  Definitions.

    As used in this part, the term--
    Act means the State Mining and Mineral Resources Research Program 
Act of 1984 and subsequent amendments.
    Advisory Committee means the Advisory Committee on Mining and 
Mineral Resources Research appointed by the Secretary pursuant to 30 
U.S.C. 1229.
    Allotment grant means funds made available to a mineral institute 
for the support of mineral-related research and education on a matching 
(formula) basis in a particular fiscal year pursuant to 30 U.S.C. 1221 
and under the regulations contained herein.
    Bureau means the Bureau of Mines.
    Call for proposals means a letter from the Director to eligible 
mineral institutes and generic mineral technology centers requesting 
proposals for allotment or research grants, and specifying the format 
and date for receipt at the Office and other conditions. Separate Calls 
for proposals are issued annually for allotment and research grants. 
Applications for funds may be submitted only in response to a Call for 
Proposals.
    Director means Director of the Bureau of Mines.
    Generic mineral technology center means a cooperative mineral 
resources research effort in a specific area of broad applicability 
across the minerals industry headquartered in one institute with 
participation by one or more affiliate mineral institutes as authorized 
under 30 U.S.C. 1222.
    Grant agreement means the legal document that sets forth the rules 
for the administration of the grant, including the responsibilities and 
privileges of the recipient, the amount of the award, reports required, 
and applicable rules and regulations.
    Mineral institute means a competent and qualified mining and mineral 
resources research institute, department, or component of a college or 
university that conducts mineral resources research, which is determined 
to be eligible in accordance with the provisions of the Act, and which 
is designated by the Secretary as a State Mining and Mineral Resources 
Institute.
    Mineral resources research means research, investigations, 
demonstrations, and experiments of a basic or practical nature relating 
to mineral exploration, extraction, processing, development, production, 
mining and technology, supply and demand, conservation and best use of 
available supplies, and the mineral-related aspects of other 
disciplines; and the training of mineral engineers and scientists 
through such activity; and the planning and coordination of such 
cooperative activity with other mineral institutes and those other 
agencies and individuals as may contribute to the solution of mining and 
mineral resources problems.
    Office means Office of Mineral Institutes.
    Secretary means the Secretary of the Interior or his authorized 
representative.



Sec. 652.6  Eligibility.

    Only institutions of higher learning (post-secondary institutions 
having graduate research programs) designated by the Secretary, after 
consultation with, and upon the advice of the Advisory Committee, as a 
State Mining and Mineral Resources Research Institute are eligible to 
receive funds under this program. Only one institution may be designated 
per State. To qualify as a mineral institute, institutions must meet all 
the following criteria as determined by the Advisory Committee:
    (a) Be either a public college or university or, in a State not 
having an eligible public college or university, a private college or 
university in that State.
    (b) Be recommended by the Governor of the State, as eligible, in the 
absence of contrary act by the legislature of the State.
    (c) Have in existence a substantial program of graduate instruction 
and research in mining or mineral extraction or closely related fields 
which has a demonstrated history of achievement.
    (d) Evidence institutional commitment to the purposes of the Act.

[[Page 534]]

    (e) Exhibit significant industrial cooperation in activities within 
the scope of the Act.
    (f) Have in existence an engineering program in mining or minerals 
extraction that is accredited by the Accreditation Board for Engineering 
and Technology, or show evidence of equivalent institutional capability.
    (g) Employ at least six full-time permanent faculty members in the 
department or component of the institution conducting instruction and 
research in mining and mineral extraction.
    (h) Meet such other criteria as the Advisory Committee shall deem 
necessary or desirable.



Sec. 652.7  Responsibilities of institutions designated as mineral institutes.

    (a) Each institution designated as mineral institute has the duty of 
planning and conducting mineral resources research. To carry out its 
responsibility, it shall appoint a mineral institute director from its 
faculty or staff, who is professionally qualified in minerals research 
and education.
    (b) Mineral institute directors shall be responsible for preparation 
of allotment grant proposals; for the technical administration of 
allotment grant agreements; for periodic reporting to the Bureau of 
Mines; for the preparation and transmission to the Bureau of Mines of an 
annual institute status report; for providing such coordination as may 
be necessary between various departments, units, and individuals at that 
institution to achieve a focused minerals program of value to the 
mineral institute's State and region; for the coordination between and 
among the minerals programs of the several mineral institutes; for 
responding to requests for information regarding the minerals program at 
that institution from the Bureau of Mines, the Advisory Committee, and 
the public; and for the selection and transmission of the best research 
proposals from that institution for inclusion in the generic mineral 
technology center program.



Sec. 652.8  Applications for allotment grants.

    Applications for annual allotment grants shall be submitted in 
response to an annual call for proposals issued by the Bureau of Mines 
to mineral institutes. To receive a new allotment grant, a mineral 
institute must have submitted all reports due and shall not have been 
found by the Secretary to have improperly diminished, lost, or 
misapplied funds previously received. Such funds shall be replaced by 
the State concerned and until so replaced no subsequent grant shall be 
allotted or paid to the institute of that State. Each allotment grant 
application shall be responsive to 30 U.S.C. 1221(b) and as a minimum 
shall consist of the following elements in duplicate:
    (a) A completed Standard Form 424.
    (b) A plan to provide for the training of individuals as mineral 
engineers and scientists under a curriculum appropriate to the field of 
mineral resources and mineral engineering and related fields.
    (c) A budget to support that plan.
    (d) Assurance that Federal funds will supplement and, to the extent 
practicable, increase the level of funds that would otherwise have been 
available for the purposes of the Act, and in no case supplant such 
funds.
    (e) Such other information as is requested in the Call for 
Proposals.

The Secretary shall deny or reduce funds to mineral institutes where 
proposals or portions thereof are not complementary to the mission of 
the Department or the goals of this program.



Sec. 652.9  Generic mineral technology centers.

    All research supported under this program, except for that funded 
through allotment grants, is funded through established generic mineral 
technology centers (generic centers). Each generic center provides a 
focus for mineral research in a specific area of broad applicability 
across the minerals industry. Each generic center has the following 
characteristics:
    (a) It is headquartered in one mineral institute with participation 
by one or more affiliate institutions.
    (b) A generic center director supervises the operation of the center 
including the coordination of related projects; makes arrangements for 
an annual seminar; provides for operation of a reference center; makes 
recommendations to the Bureau of Mines

[[Page 535]]

on budget revisions, equipment purchases, and other grant modifications; 
and provides technical leadership for the center.
    (c) A reference center serves as a centralized repository of 
literature concerning the generic research area and also is a repository 
of all periodic and final reports, dissertations, and contributions to 
the technical literature resulting from generic center research.
    (d) An annual seminar provides opportunity for students and 
principal investigators to exchange ideas and present their latest 
research in the generic area.
    (e) A Research Council, consisting of experts in the generic 
research area from industry, government and, where possible, academia, 
attends the annual seminars, receives periodic reports, evaluates 
research proposals, and provides recommendations to the Bureau of Mines 
on the program of the center.
    (f) New proposals for research, submitted through generic center and 
mineral institute directors, are evaluated on a competitive basis, in 
writing, and through Council discussion.



Sec. 652.10  Application for research grants.

    Proposals may be submitted to the Bureau of Mines in any of the 
generic mineral technology areas through mineral institute and generic 
mineral technology center directors in response to an annual call for 
proposals which describes the format of the proposals. Proposals shall 
address the requirements of 30 U.S.C. 1222 (b) through (d) as detailed 
in the call for proposals. No portion of any research grant shall be 
applied to the acquisition by purchase or lease of any land or interests 
therein or the rental, purchase, construction, preservation or repair of 
any building.



Sec. 652.11  Transfers of research and allotment grant funds.

    Under 30 U.S.C. 1223(b), mineral institutes are authorized to 
conduct cooperative programs with other mineral institutes and with such 
other agencies and individuals as may contribute to the solution of the 
mining and mineral resource problems involved. Mineral institutes may 
utilize their funds to pay for projects at other institutions under the 
following limitations:
    (a) The mineral institute director (for allotment grants) or the 
generic mineral technology center director (for research grants) for the 
institution awarded the funds by the Bureau, or the designated 
representative of the above, shall administer, conduct and supervise all 
funded programs.
    (b) All proposals to fund noninstitute activities shall be 
specifically set forth in the grant proposal applications required under 
Sec. 652.8 and Sec. 652.10 and must be explicitly approved by the Bureau 
of Mines.
    (c) All subgrants and subcontracts, service agreements, and 
interdivisional work authorizations shall be subject to the same terms 
and conditions as the grant.
    (d) Copies of all agreements for funding of programs conducted by 
noninstitute organizations, universities, or individuals shall be made 
available to the Bureau of Mines upon request.



Sec. 652.12  Governing provisions for grants.

    Performance under all grants shall be in accord with the terms and 
conditions set forth in OMB Circulars A-110 (General Administration), A-
21 (Cost Principles), A-88 (Indirect Cost Rates and Audit), and all 
other applicable laws and regulations. Copies of the OMB circulars are 
available from Publications Services, 725 17th Street NW., Room 2200, 
Washington, DC 20503. All uses, products, processes, patents, and other 
developments under this program, with such exceptions as the Secretary 
may make in the public interest, are to be made promptly available to 
the public. Patentable inventions shall be governed by the provisions of 
Pub. L. 96-517.

[54 FR 38378, Sept. 18, 1989, as amended at 55 FR 35300, Aug. 29, 1990]



Sec. 652.13  Reports.

    The following reports are required from program participants:
    (a) Annual Institute Status Report (30 U.S.C. 1223(a)(3)). On or 
before September 1 of each year, the mineral institute director for each 
institute shall submit to the Office a written report on work 
accomplished; the status of

[[Page 536]]

projects underway; a listing of scholarship and fellowship holders 
supported under this program, their departmental affiliation, 
citizenship, amount of award, and thesis title, if selected; and a 
statement of disbursements of funds received under this program. This 
report shall cover all activities under both the allotment grant and 
research grant program.
    (b) Periodic Technical Reports. Each mineral institute and generic 
center director shall make brief periodic written reports as specified 
in the grant document to the Office describing progress made on each 
active project. Generic center directors shall also send their periodic 
reports to members of the applicable Research Councils.
    (c) Periodic Financial Reports. Each mineral institute and generic 
center shall submit completed Standard Form-269 reports concurrent with 
the periodic technical progress reports.
    (d) Annual Property Report. Each mineral institute and generic 
center shall submit by November 15 a completed Bureau of Mines Form 6-
359 on nonexpendable property.
    (e) Final Reports. The annual institute status report will serve as 
the final report for allotment grants. A final report is required for 
each approved generic center research project. Principal investigators 
are encouraged to publish in the technical literature any information 
developed in the course of carrying out a research project. A published 
journal article may be substituted for a final report, provided the 
Grantee delivers five copies of the reprint to the Office. If the 
findings of a research project are not published, five copies of a final 
report shall be furnished. An unpublished final report should be 
prepared in accordance with ANSI 239.18-1974, ``American National 
Standard Guidelines for Format and Production of Scientific and 
Technical Reports.''
    (1) Credits. Every final research report or publication in the 
technical literature shall contain one of the following statements or 
the equivalent:

    This research has been supported by the Department of the Interior's 
Mineral Institute Program administered by the Bureau of Mines under 
allotment grant number ________.
    This research has been supported by the Department of the Interior's 
Mineral Institute Program administered by the Bureau of Mines through 
the Generic Mineral Technology Center for ________ under research grant 
number ________.



Sec. 652.14  Information collection.

    The information collection requirements contained in this section 
have been approved by the Office of Management and Budget under 44 
U.S.C. 3501 et seq. and assigned clearance number 1032-0116. The 
information is being collected to evaluate the effectiveness of the 
programs and responses are required to obtain a benefit in accordance 
with 30 U.S.C. 1221-1230. Public reporting burden for this information, 
including the time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing the collection of information is as follows:

Performance Report..............................................16 hours
Report of Funded Scholarship and Fellowships.....................2 hours
Summary Report of Inventions and Subgrants........................1 hour
Grantee Inventory of Property Purchased from Grant Funds.........2 hours
Budget Information Report.......................................8 hours.

    Send comments regarding this burden estimate or any other aspect of 
this collection of information, including suggestions for reducing the 
burden, to Office of Statistical Standards, Bureau of Mines, Washington, 
DC 20241; and to the Office of Management and Budget, Paperwork 
Reduction Project (OMB No. 1032-0116), Washington, DC 20503.



Sec. 652.15  Advisory committee.

    An Advisory Committee on Mining and Mineral Resources Research, 
appointed by the Secretary under 30 U.S.C. 1229, shall consult with and 
make recommendations to the Secretary on the operation of and the making 
of grants under this program and it shall determine the eligibility of a 
college or university to participate as a Mining and Mineral Resources 
Research Institute under the Act and make such recommendation to the 
Secretary.

[[Page 537]]



Sec. 652.16  Site visits.

    In relation to the substantive scientific and administrative 
operations of grantees, the Bureau of Mines or the Advisory Committee 
may perform inspections of activities authorized and financed pursuant 
to these regulations. Such inspections may cover acceptability of 
progress, consistency with approved plans, and institute eligibility.



Sec. 652.17  Grant modifications.

    (a) The mineral institute and generic center directors are 
responsible for promptly notifying the Office of events which may 
require modification of grant agreements, such as:
    (1) Rebudgetings,
    (2) No-cost time extensions, or
    (3) Changes in scope.
    (b) Permission of the Office is also required for the following 
actions under a grant:
    (1) Equipment purchase of $1000 or more,
    (2) Property transfer, or
    (3) Foreign travel.



Sec. 652.18  Grant reduction and termination.

    If a mineral institute or generic mineral technology center does not 
follow the provisions and terms of a grant or does not fully implement a 
grant program, the Director may reduce the size of or may suspend or 
terminate a grant.

[54 FR 38378, Sept. 18, 1989; 55 FR 35301, Aug. 29, 1990]



PARTS 653--699 [RESERVED]



[[Page 539]]



                              FINDING AIDS




  --------------------------------------------------------------------

  A list of CFR titles, subtitles, chapters, subchapters and parts and 
an alphabetical list of agencies publishing in the CFR are included in 
the CFR Index and Finding Aids volume to the Code of Federal Regulations 
which is published separately and revised annually.

  Material Approved for Incorporation by Reference
  Table of CFR Titles and Chapters
  Alphabetical List of Agencies Appearing in the CFR
  Redesignation Table
  List of CFR Sections Affected

[[Page 541]]

            Material Approved for Incorporation by Reference

                      (Revised as of July 1, 1997)

  The Director of the Federal Register has approved under 5 U.S.C. 
552(a) and 1 CFR Part 51 the incorporation by reference of the following 
publications. This list contains only those incorporations by reference 
effective as of the revision date of this volume. Incorporations by 
reference found within a regulation are effective upon the effective 
date of that regulation. For more information on incorporation by 
reference, see the preliminary pages of this volume.


30 CFR CHAPTER II (PARTS 200-699)

MINERALS MANAGEMENT SERVICE, DEPARTMENT OF THE INTERIOR
                                                                  30 CFR


American Concrete Institute

  P.O. Box 19150, Detroit, Michigan 48219
ACI Standard 318-83, Building Code Requirements       250.138(b)(4)(i), 
  for Reinforced Concrete, plus Commentary on        (b)(6)(i), (b)(7), 
  Building Code Requirements for Reinforced          (b)(8)(i), (b)(9), 
  Concrete (ACI 318R-83).                              (b)(10), (c)(3), 
                                                     (d)(1)(v), (d)(5), 
                                                        (d)(6), (d)(7), 
                                                        (d)(8), (d)(9), 
                                                         (e)(1)(i), and 
                                                               (e)(2)(i)
ACI Standard 318-95, Building Code Requirements               250.1(a); 
  for Reinforced Concrete, plus Commentary on         250.138(b)(4)(i), 
  Building Code Requirements for Reinforced          (b)(6)(i), (b)(7), 
  Concrete (ACI 318R-95).                            (b)(8)(i), (b)(9), 
                                                       (b)(10), (c)(3), 
                                                     (d)(1)(v), (d)(5), 
                                                        (d)(6), (d)(7), 
                                                        (d)(8), (d)(9), 
                                                    (e)(1)(i), (e)(2)(i)
ACI Standard 357-R-84, Guide for the Design and             250.130(g); 
  Construction of Fixed Offshore Concrete            250.138(c)(2), and 
  Structures, 1984.                                               (c)(3)


American Institute of Steel Construction, Inc.

  P.O. Box 4588, Chicago, Illinois 60680.
AISC Standard S326, Specification for the Design,    250.137(b)(1)(ii), 
  Fabrication and Erection of Structural Steel for      (c)(4)(ii), and 
  Buildings, 1978 Edition.                                   (c)(4)(vii)
AISC Standard Specification for Structural Steel              250.1(b); 
  Buildings, Allowable Stress Design and Plastic     250.137(b)(1)(ii), 
  Design, June 1, 1989, with Commentary.                 (c)(4)(ii) and 
                                                             (c)(4)(vii)


American National Standards Institute

  Sales Department, 1430 Broadway, New York, New 
  York 10018


American Society of Mechanical Engineers

  United Engineering Center, 345 East 47th Street, 
  New York, New York 10017.

[[Page 542]]

ANSI/ASME Boiler and Pressure Vessel Code, Section 250.1; 250.123(b)(1), 
  I, Power Boilers, including Appendices, 1983           and (b)(1)(i); 
  Edition, with Summer and Winter 1983 and 1984       250.292(b)(1) and 
  and Summer 1985 Addendas.                                    (b)(1)(i)
ANSI/ASME Boiler and Pressure Vessel Code, Section            250.1(c); 
  I, Power Boilers including Appendices, 1995         250.123(b)(1) and 
  Edition.                                                   (b)(1)(i); 
                                                      250.292(b)(1) and 
                                                               (b)(1)(i)
ANSI/ASME Boiler and Pressure Vessel Code, Section 250.1; 250.123(b)(1), 
  IV, Heating Boilers, including Nonmandatory            and (b)(1)(i); 
  Appendices A, B, C, D, E, F, H, I, and J and the    250.292(b)(1) and 
  Guide to Manufacturers Data Report Forms, 1983               (b)(1)(i)
  Edition, with Summer and Winter 1983 and 1984 
  and Summer 1985 Addendas.
ANSI/ASME Boiler and Pressure Vessel Code, Section            251.1(c); 
  IV, Heating Boilers, including Nonmandatory         250.123(b)(1) and 
  Appendixes A, B, C, F, H, I, and J and the Guide           (b)(1)(i); 
  to Manufacturers Data Report Forms, 1995            250.292(b)(1) and 
  Edition.                                                     (b)(1)(i)
ANSI/ASME Boiler and Pressure Vessel Code, Section 250.1; 250.123(b)(1), 
  VIII, Pressure Vessels, Divisions 1 and 2              and (b)(1)(i); 
  including Nonmandatory Appendices, 1983 Edition,    250.292(b)(1) and 
  with Summer and Winter 1983 and 1984 and Summer              (b)(1)(i)
  1985 Addendas.
ANSI/ASME Boiler and Pressure Vessel Code, Section            250.1(c); 
  VIII, Pressure Vessels, Divisions 1 and 2,          250.123(b)(1) and 
  including Nonmandatory Appendices, 1995 Edition.           (b)(1)(i); 
                                                      250.292(b)(1) and 
                                                               (b)(1)(i)
ANSI/ASME B 16.5-1981, Pipe Flanges and Flanged     250.1; 250.152(b)(2)
  Fittings.
ANSI/ASME B 16.5-1988, (including Errata) and B               250.1(c); 
  16.5a-1992 Addenda, Pipe Flanges and Flanged             250.152(b)(2)
  Fittings.
ANSI/ASME B 31.8-1986, Gas Transmission and            250.1; 250.152(a)
  Distribution Piping Systems.
ANSI/ASME B 31.8-1995, Gas Transmission and         250.1(c); 250.152(a)
  Distribution Piping Systems.
ASME/ANSI SPPE-1-1988, and SPPE-1a-1988, SPPE-1b-  250.1; 250.126(c)(2), 
  1989, SPPE-1c-1989, and SPPE-1d-1990 (addenda),        (e)(1), and (3)
  Quality Assurance and Certification of Safety 
  and Pollution Prevention Equipment Used in 
  Offshore Oil and Gas Operations.
ANSI Z88.2-1980, Practices for Respiratory                       250.1; 
  Protection.                                      250.67(h)(2)(iv), and 
                                                               (h)(6)(i)
ANSI Z88.2-1992, American National Standard for    250.67(g)(4)(iv) and 
  Respiratory Protection.                                    (j)(13)(ii)


The American Petroleum Institute

  1220 L Street, NW., Washington, D.C. 20005.
API Spec Q1, Specification for Quality Programs,    250.1; 250-126(c)(3)
  Third Edition, June 1990, API Stock No. 811-
  00001.
API RP 2A, Recommended Practice for Planning,        250.1; 250.130(g); 
  Designing and Constructing Fixed Offshore                   250.142(a)
  Platforms, Eighteenth Edition, September 1, 
  1989, API Stock No. 811-00200.
API RP 2A, Recommended Practice for Planning,      250.1(d); 250.130(g); 
  Designing, and Constructing Fixed Offshore                  250.142(a)
Platforms Working Stress Design, Nineteenth 
[[Page 543]]gust 1, 1991.

API RP 2D, Recommended Practice for Operation and     250.1; 250.51(g); 
  Maintenance of Offshore Cranes, Second Edition,             250.260(g)
  June 1984.
API RP 2D, Recommended Practice for Operation and  250.1(d); 250.20(c); 
  Maintenance of Offshore Cranes, Third Edition,              250.260(g)
  June 1, 1995.
API RP T-2, Recommended Practice for Qualification   250.1; 250.210(a); 
  Programs for Offshore Production Personnel Who     250.212(a), and (c)
  Work with Anti-Pollution Safety Devices, Revised 
  October 1975.
API Spec 6A, Specification for Wellhead and        250.1; 250.152(b)(1), 
  Christmas Tree Equipment, Fifteenth Edition,                and (b)(2)
  April 1, 1986, with Supplement 1, December 1986, 
  API Stock No. 811-03100.
API Spec 6A, Specification for Wellhead and                   250.1(d); 
  Christmas Tree Equipment, Seventeenth Edition,   250.126(c)(3), (e)(2) 
  February 1, 1996.                                         and (e)(3); 
                                                      250.152(b)(1) and 
                                                                  (b)(2)
API Spec 6A V1, Specification for Verification                250.1(d); 
  Test of Wellhead Surface Safety Valves and               250.126(c)(3)
  Underwater Safety Valves for Offshore Service, 
  First Edition, February 1, 1996.
API Spec 6D, Specification for Pipeline Valves,     250.1; 250.152(b)(1)
  End Closures, Connectors and Swivels, Eighteenth 
  Edition, January 1982 with Supplement 3, July 
  1985, API Stock No. 811-03200.
API Spec 6D, Specification for Pipeline Valves                250.1(d); 
  (Gate, Plug, Ball, and Check Valves), Twenty-            250.152(b)(1)
  first Edition, March 31, 1994.
API Spec 14A, Specification for Subsurface Safety  250.1; 250.126(c)(3), 
  Valve Equipment, Seventh Edition, January 1988         (e)(2), and (3)
  with Supplement 1, August 1989, API Stock No. 
  811-07150.
API Spec 14A, Specification for Subsurface Safety             250.1(d); 
  Valve Equipment, Ninth Edition, July 1, 1994.    250.126(c)(3), (e)(2) 
                                                              and (e)(3)
API RP 14B, Recommended Practice for Design,           250.1; 250.126(d)
  Installation, and Operation of Subsurface Safety 
  Valve Systems, Second Edition, November 1981 
  with Supplement 3, June 1986, API Stock No. 811-
  07160.
API RP 14B Recommended Practice for Design,                   250.1(d); 
  Installation, Repair, and Operation of                 250.121(e)(4); 
  Subsurface Safety Valve Systems, Fourth Edition,    250.124(a)(1)(i); 
  July 1, 1994, with Errata dated June, 1996.                 250.126(d)
API RP 14C, Recommended Practice for Analysis,       250.1; 250.122(b), 
  Design, Installation and Testing of Basic         (e)(2); 250.123(a), 
  Surface Safety Systems for Offshore Production     (b)(2)(i), (b)(4), 
  Platforms, Fourth Edition, September 1, 1986,      (b)(5)(i), (b)(7), 
  API Stock No. 811-07180.                           (b)(9)(v), (c)(2); 
                                                    250.124(a), (a)(5); 
                                                            250.152(d); 
                                                         250.154(b)(9); 
                                                         250.291(c) and 
                                                   (d)(2); 250.292(b)(2) 
                                                         and (b)(4)(v); 
                                                              250.293(a)
API Spec 14D, Specification for Wellhead Surface   250.1; 250.126(c)(3), 
  Safety Valves and Underwater Safety Valves for          (e)(2) and (3)
Offshore Service, Seventh Edition, January 1988 
[[Page 544]]ment 1, August 1989, API Stock No. 
  811-07183.
API Spec 14D, Specification for Wellhead Surface              250.1(d); 
  Safety Valves and Underwater Safety Valves for   250.126(c)(e), (e)(2) 
  Offshore Service, Ninth Edition, June 1, 1994,              and (e)(3)
  with Errata dated August 1, 1994.
API RP 14E, Recommended Practice for Design and    250.1; 250.122(e)(3); 
  Installation of Offshore Production Platform        250.291(b)(2) and 
  Piping Systems, Fourth Edition, April 15, 1984.                 (d)(3)
API RP 14E, Recommended Practice for Design and               250.1(d); 
  Installation of Offshore Production Platform           250.122(e)(3); 
  Piping Systems, Fifth Edition, October 1, 1991.     250.291(b)(2) and 
                                                                  (d)(3)
API RP 14F, Recommended Practice for Design and       250.1; 250.53(c); 
  Installation of Electrical Systems for Offshore     250.123(b)(9)(v); 
  Production Platforms, Second Edition, July 1,         250.292(b)(4)(v)
  1985.
API RP 14F, Recommended Practice for Design and    250.1(d); 250.53(c); 
  Installation of Electrical Systems for Offshore     250.123(b)(9)(v); 
  Production Platforms, Third Edition, September        250.292(b)(4)(v)
  1, 1991.
API RP 14G, Recommended Practice for Fire          250.1; 250.123(b)(8), 
  Prevention and Control on Open Type Offshore           and (b)(9)(v); 
  Production Platforms, Second Edition, May 1,        250.292(b)(3) and 
  1986, API Stock No. 811-07194.                               (b)(4)(v)
API RP 14G, Recommended Practice for Fire                     250.1(d); 
  Prevention and Control on Open Type Offshore        250.123(b)(8) and 
  Production Platforms, Third Edition, December 1,           (b)(9)(v); 
  1993.                                               250.292(b)(3) and 
                                                               (b)(4)(v)
API RP 14H, Recommended Practice for Use of            250.1; 250.126(d)
  Surface Safety Valves and Underwater Safety 
  Valves Offshore, Second Edition, April 1984, API 
  Stock No. 811-07196.
API RP 14H, Recommended Practice for Installation, 250.1(d); 250.122(d); 
  Maintenance and Repair of Surface Safety Valves             250.126(d)
  and Underwater Safety Valves Offshore, Fourth 
  Edition, July 1, 1994.
API RP 500, Recommended Practice for               250.1(d); 250.53(b); 
  Classification of Locations for Electrical          250.122(e)(4)(i); 
  Installations at Petroleum Facilities, First        250.123(b)(9)(i); 
  Edition, June 1, 1991.                              250.291(b)(3) and 
                                                             (d)(4)(i); 
                                                        250.292(b)(4)(i)
API RP 500B, Recommended Practice for                 250.1; 250.53(b); 
  Classification of Areas for Electrical              250.122(e)(4)(i); 
  Installations at Drilling Rigs and Production       250.123(b)(9)(i); 
  Facilities on Land and on Marine Fixed and          250.291(b)(3) and 
  Mobile Platforms, Third Edition, October 1,                (d)(4)(i); 
  1987, API Stock No. 811-06000.                        250.292(b)(4)(i)
API Standard 2545, Method of Gauging Petroleum and               250.1; 
  Petroleum Products, October 1965, reaffirmed         250.180(f)(2)(ii)
  October 1992, API Stock No. 852-25450.
API Standard 2550, Method for Measurement and                    250.1; 
  Calibration of Upright Cylindrical Tanks, First       250.180(f)(2)(i)
  Edition, October 1965, API Stock No. 852-25500.
API Standard 2551, Standard Method for Measurement               250.1; 
  and Calibration of Horizontal Tanks, First            250.180(f)(2)(i)
Edition, 1965, reaffirmed October 1992, API 
[[Page 545]]52-25510.

API Standard 2552, Measurement and Calibration of                250.1; 
  Spheres and Spheroids, First Edition, 1966,           250.180(f)(2)(i)
  reaffirmed October 1992, API Stock No. 852-
  25520.
API Standard 2555, Method for Liquid Calibration                 250.1; 
  of Tanks, First Edition, September 1966,              250.180(f)(2)(i)
  reaffirmed October 1992, API Stock No. 852-25550 
  (also available as ANSI/ASTM D 1406-65), 
  reapproved 1984.
API RP 2556, Recommended Practice for Correcting                 250.1; 
  Gage Tables for Incrustation, First Edition,          250.180(f)(2)(i)
  August 1968, API Stock No. 852-25560.
API RP 2556, Recommended Practice for Correcting              250.1(d); 
  Gage Tables for Incrustation, Second Edition,      250.180(f)(2)(i)(C)
  August 1993.
API Manual of Petroleum Management Standard                   250.1(d); 
  (MPMS), Chapter 2, section 2A, Tank Calibration,   250.180(f)(2)(i)(A)
  Measurement and Calibration of Upright 
  Cylindrical Tanks by the Manual Strapping 
  Method, First Edition, February 1995.
API MPMS, Chapter 2, section 2B, Calibration of               250.1(d); 
  Upright Cylindrical Tanks Using the Optical        250.180(f)(2)(i)(B)
  Reference Line Method, First Edition, March 
  1989.
API MPMS, Chapter 3, section 1A, Standard Practice            250.1(d); 
  for the Manual Guaging of Petroleum and           250.180(f)(2)(ii)(A)
  Petroleum Products, First Edition, December 
  1994.
API MPMS, Chapter 3, section 1B, Standard Practice            250.1(d); 
  for Level Measurement of Liquid Hydrocarbons in   250.180(f)(2)(ii)(A)
  Stationary Tanks by Automatic Tank Guaging, 
  First Edition, April 1992.
API MPMS, Chapter 4, Proving Systems, First                      250.1; 
  Edition, May 1978, API Stock No. 852-30080.      250.180(c)(6)(i), and 
                                                              (d)(3)(iv)
API MPMS, Chapter 4, Proving Systems, section 1,              250.1(d); 
  Introduction, First Edition, July 1988,          250.180(c)(6)(i) and 
  reaffirmed October 1993.                                    (d)(3)(iv)
API MPMS, Chapter 4, section 2, Conventional Pipe             250.1(d); 
  Provers, First Edition, October 1988, reaffirmed 250.180(c)(6)(i) and 
  October 1993.                                               (d)(3)(iv)
API MPMS, Chapter 4, section 3, Small Volume                  250.1(d); 
  Provers, First Edition, July 1988, reaffirmed    250.180(c)(6)(i) and 
  October 1993.                                               (d)(3)(iv)
API MPMS, Chapter 4, section 4, Tank Provers,                 250.1(d); 
  First Edition, October 1988, reaffirmed October  250.180(c)(6)(i) and 
  1993.                                                       (d)(3)(iv)
API MPMS, Chapter 4, section 5, Master-Meter                  250.1(d); 
  Provers, First Edition, October 1988, reaffirmed 250.180(c)(6)(i) and 
  October 1993.                                               (d)(3)(iv)
API MPMS, Chapter 4, section 6, Pulse                         250.1(d); 
  Interpolation, First Edition, July 1988,         250.180(c)(6)(i) and 
  reaffirmed October 1993.                                    (d)(3)(iv)
API MPMS, Chapter 4, section 7, Field-Standard                250.1(d); 
  Test Measures, First Edition, October 1988.      250.180(c)(6)(i) and 
                                                              (d)(3)(iv)
API MPMS, Chapter 5, section 1, Metering, General             250.1(d); 
  Considerations for Measurement by Meters, Third      250.180(c)(6)(ii)
  Edition, September 1995.
API MPMS, Chapter 5, section 2, Measurement of                250.1(d); 
  Liquid Hydrocarbons by Displacement Meters,          250.180(c)(6)(ii)
Second Edition, November 1987, reaffirmed 
[[Page 546]]2.

API MPMS, Chapter 5, section 3, Measurement of                250.1(d); 
  Liquid Hydrocarbons by Turbine Meters, Third         250.180(c)(6)(ii)
  Edition, September 1995.
API MPMS, Chapter 5, section 4, Accessory                     250.1(d); 
  Equipment for Liquid Meters, Third Edition,          250.180(c)(6)(ii)
  September 1995.
API MPMS, Chapter 5, section 5, Fidelity and                  250.1(d); 
  Security of Flow Measurement Pulsed-Data             250.180(c)(6)(ii)
  Transmission Systems, First Edition, June 1982, 
  reaffirmed October 1992.
API MPMS, Chapter 5.1, Foreword, General                         250.1; 
  Considerations and Scope, First Edition,             250.180(c)(6)(ii)
  November 1976, API Stock No. 852-30101.
API MPMS, Chapter 5.2, Measurement of Liquid                     250.1; 
  Hydrocarbons by Displacement Meter Systems,          250.180(c)(6)(ii)
  First Edition, January 1977, API Stock No. 852-
  30102.
API MPMS, Chapter 5.3, Turbine Meters, First                     250.1; 
  Edition, July 1976, API Stock No. 852-30103.         250.180(c)(6)(ii)
API MPMS, Chapter 5.4, Instrumentation or                        250.1; 
  Accessory Equipment for Liquid Hydrocarbon           250.180(c)(6)(ii)
  Metering Systems, First Edition, July 1976, API 
  Stock No. 852-30104.
API MPMS, Chapter 5.5, Fidelity and Security of                  250.1; 
  Flow Measurement Pulsed Data Transmission            250.180(c)(6)(ii)
  Systems, First Edition, June 1982, API Stock No. 
  852-30105.
API MPMS, Chapter 6, Metering Assemblies, section             250.1(d); 
  1, Lease Automatic Custody Transfer (LACT)              250.180(c)(6) 
  Systems, Second Edition, May 1991.                            (iii)(A)
API MPMS, Chapter 6, section 6, Pipeline Metering             250.1(d); 
  Systems, Second Edition, May 1991.                      250.180(c)(6) 
                                                                (iii)(B)
API MPMS, Chapter 6, section 7, Metering Viscous              250.1(d); 
  Hydrocarbons, Second Edition, May 1991.                 250.180(c)(6) 
                                                                (iii)(C)
API MPMS, Chapter 6.1, LACT Systems, First         250.1; 250.180(c)(6) 
  Edition, February 1981, API Stock No. 852-30121.              (iii)(A)
API MPMS, Chapter 6.6, Pipeline Metering Systems,  250.1; 250.180(c)(6) 
  First Edition, August 1981, API Stock No. 852-                (iii)(B)
  30126.
API MPMS, Chapter 6.7, Metering Viscous            250.1; 250.180(c)(6) 
  Hydrocarbons, First Edition, January 1981, API                (iii)(C)
  Stock No. 852-30127.
API MPMS, Chapter 7, Temperature Determination,               250.1(d); 
  section 2, Dynamic Temperature Determination,    250.180(c)(6)(iv) (A) 
  Second Edition, March 1995.                         and (f)(2)(iii)(A)
API MPMS, Chapter 7, section 3, Static Temperature            250.1(d); 
  Determination Using Portable Electronic          250.180(c)(6)(iv) (B) 
  Thermometers, First Edition, July 1985,             and (f)(2)(iii)(B)
  reaffirmed March 1990.
API MPMS, Chapter 7.2, Dynamic Temperature         250.1; 250.180(c)(6) 
  Determination, First Edition, June 1985, API      (iv)(A), and (f)(2) 
  Stock No. 852-30142.                                          (iii)(A)
API MPMS, Chapter 7.3, Static Temperature          250.1; 250.180(c)(6) 
  Determination Using Portable Electronic                  (iv)(B), and 
  Thermometers, First Edition, July 1985, API             (f)(2)(iii)(B)
  Stock No. 852-30143.
API MPMS, Chapter 8, Sampling, section 1, Standard            250.1(d); 
  Practice for Manual Sampling of Petroleum and    250.180(c)(6)(v) and 
  Petroleum Products, Third Edition, October 1995.            (f)(2)(iv)

[[Page 547]]

API MPMS, Chapter 8, section 2, Standard Practice             250.1(d); 
  for Automatic Sampling of Liquid Petroleum and   250.180(c)(6) (v) and 
  Petroleum Products, Second Edition, October                 (f)(2)(iv)
  1995.
API MPMS, Chapter 8.1, Manual Sampling of          250.1; 250.180(c)(6) 
  Petroleum and Petroleum Products, First Edition,   (v), and (f)(2)(iv)
  October 1981, API Stock No. 852-30161.
API MPMS, Chapter 8.2, Automatic Sampling of       250.1; 250.180(c)(6) 
  Petroleum and Petroleum Products, First Edition,   (v), and (f)(2)(iv)
  April 1983, API Stock No. 852-30162.
API MPMS, Chapter 9, Density Determination,                   250.1(d); 
  section 1, Hydrometer Test Method for Density,   250.180(c)(6)(vi) (A) 
  Relative Density (Specific Gravity), or API           and (f)(2)(v)(A)
  Gravity of Crude Petroleum and Liquid Petroleum 
  Products, First Edition, June 1981, reaffirmed 
  October 1992.
API MPMS, Chapter 9, section 2, Pressure                      250.1(d); 
  Hydrometer Test Method for Density or Relative   250.180(c)(6)(vi) (B) 
  Density, First Edition, April 1982, reaffirmed        and (f)(2)(v)(B)
  October 1992.
API MPMS, Chapter 9.1, Hydrometer Test Method for                250.1; 
  Density, Relative Density (Specific Gravity), or   250.180(c)(6)(vi), 
  API Gravity of Crude Petroleum and Liquid                and (f)(2)(v)
  Petroleum Products, First Edition, June 1981, 
  API Stock No. 852-30181.
API MPMS, Chapter 9.2, Pressure Hydrometer Test                  250.1; 
  Method for Density or Relative Density, First      250.180(c)(6)(vi), 
  Edition, April 1982, API Stock No. 852-30182.            and (f)(2)(v)
API MPMS, Chapter 10, Sediment and Water, section             250.1(d); 
  1, Determination of Sediment in Crude Oils and     250.180(c)(6)(vii) 
  Fuel Oils by the Extraction Method, First                 (A) and (f) 
  Edition, April 1981, reaffirmed December 1993.              (2)(vi)(A)
API MPMS, Chapter 10, section 2, Determination of             250.1(d); 
  Water in Crude Oil by Distillatio Method, First    250.180(c)(6)(vii) 
  Edition, April 1981, reaffirmed December 1993.   (B) and (f)(2)(vi)(B)
API MPMS, Chapter 10, section 3, Determination of             250.1(d); 
  Water and Sediment in Crude Oil by the                  250.180(c)(6) 
  Centrifuge Method (Laboratory Procedure), First             (vii)(C); 
  Edition, April 1981, reaffirmed December 1993.           (f)(2)(vi)(C)
API MPMS, Chapter 10, section 4, Determination of             250.1(d); 
  Sediment and Water in Crude Oil by the                  250.180(c)(6) 
  Centrifuge Method (Field Procedure), Second              (vii)(D) and 
  Edition, May 1988.                                       (f)(2)(vi)(D)
API MPMS, Chapter 10.1, Determination of Sediment  250.1; 250.180(c)(6) 
  in Crude Oils and Fuel Oils by the Extraction           (vii)(A), and 
  Method, First Edition, April 1981, API Stock No.         (f)(2)(vi)(A)
  852-30201.
API MPMS, Chapter 10.2, Determination of Water in  250.1; 250.180(c)(6) 
  Crude Oil by the Distillation Method, First             (vii)(B), and 
  Edition, April 1981, API Stock No. 852-30202.            (f)(2)(vi)(B)
API MPMS, Chapter 10.3, Determination of Water and 250.1; 250.180(c)(6) 
  Sediment in Crude Oil by the Centrifuge Method          (vii)(C), and 
  (Laboratory Procedure), First Edition, April             (f)(2)(vi)(C)
  1981, API Stock No. 852-30203.
API MPMS, Chapter 10.4 (Pub. L. 2542), Standard    250.1; 250.180(c)(6) 
  Methods of Test for Water and Sediment in Crude         (vii)(D), and 
  Oils, October 1970, API Stock No. 825-25420.             (f)(2)(vi)(D)

[[Page 548]]

API MPMS, Chapter 11.1, Volume Correction Factors, 250.1; 250.180(c)(6) 
  Volume I, Table 5A--Generalized Crude Oils and             (viii)(A), 
  JP-4 Correction of Observed API Gravity to API      (d)(3)(v)(B), and 
  Gravity at 60+ F, and Table 6A--                (f)(2)(vii)
  Generalized Crude Oils and JP-4 Correction of 
  Volume to 60+ F Against API Gravity 
  at 60+ F, First Edition, August 1980, 
  reaffirmed October 1993, API Stock No. 852-
  27000.
API MPMS, Chapter 11.2.1, Compressibility Factors  250.1; 250.180(c)(6) 
  for Hydrocarbons: 0-90+ API Gravity               (viii)(B)
  Range, First Edition, August 1984, reaffirmed 
  May 1996, API Stock No. 852-27300.
API MPMS, 11.2.2, Compressibility Factors for      250.1; 250.180(c)(6) 
  Hydrocarbons: 0.350-0.637 Relative Density                   (viii)(C)
  (60+ F/60+ F) and -
  50+ F to 140+ F Metering 
  Temperature, Second Edition, October 1986, 
  reaffirmed October 1992, API Stock No. 852-
  27307.
API MPMS, Chapter 11, Physical Properties Data,               250.1(d); 
  Addendum to section 2.2, Compressibility Factors        250.180(c)(6) 
  for Hydrocarbons, Correlation of Vapor Pressure              (viii)(D)
  for Commercial Natural Gas Liquids, First 
  Edition, December 1994.
API MPMS, Chapter 11.2.3, Water Calibration of                   250.1; 
  Volumetric Provers, First Edition, 1984,             250.180(d)(3)(iv)
  reaffirmed May 1996, API Stock No. 852-27310.
API MPMS, Chapter 12, Calculation of Petroleum                250.1(d); 
  Quantities, section 2, Calculation of Petroleum    250.180(c)(6)(ix), 
  Quantities Using Dynamic Measurement Methods and     (d)(3)(v)(A) and 
  Volumetric Correction Factors, Including Parts 1          (d)(3)(v)(C)
  and 2, Second Edition, May 1995.
API MPMS, Chapter 12.2, Calculation of Liquid                    250.1; 
  Petroleum Quantities Measured by Turbine or        250.180(c)(6)(ix), 
  Displacement Meters, First Edition, September       (d)(3)(v)(A), and 
  1981, API Stock No. 852-30302.                            (d)(3)(v)(C)
API MPMS, Chapter 14, Natural Gas Fluids                      250.1(d); 
  Measurement, section 3, Concentric Square-Edged          250.181(c)(1)
  Orifice Meters, part 1, General Equations and 
  Uncertainty Guidelines, Third Edition, September 
  1990.
API MPMS, Chapter 14, section 3, part 2,                      250.1(d); 
  Specification and Installation Requirements,             250.181(c)(1)
  Third Edition, February 1991.
API MPMS, Chapter 14, section 3, part 3, Natural              250.1(d); 
  Gas Applications, Third Edition, August 1992.            250.181(c)(1)
API MPMS, Chapter 14, section 5, Calculation of               250.1(d); 
  Gross Heating Value, Relative Density, and               250.181(c)(1)
  Compressibility Factor for Natural Gas Mixtures 
  From Compositional Analysis, Revised 1996.
API MPMS, Chapter 14, section 6, Continuous                   250.1(d); 
  Density Measurement, Second Edition, April 1991.         250.181(c)(1)
API MPMS, Chapter 14.3, Orifice Metering of         250.1; 250.181(c)(1)
  Natural Gas and Other Related Hydrocarbon 
  Fluids, Second Edition, September 1985, API 
  Stock No. 852-30343.
API MPMS, Chapter 14.5, Calculation of Gross        250.1; 250.181(c)(1)
  Heating Value, Specific Gravity, and 
  Compressibility of Natural Gas Mixtures from 
  Compositional Analysis, First Edition, January 
  1981, API Stock No. 852-30345.
API MPMS, Chapter 14.6, Installing and Proving      250.1; 250.181(c)(1)
  Density Meters Used to Measure Hydrocarbon 
  Liquid with Densities Between 0.3 to 0.7 gm/cc 
  at 15.56+ C (60+ F) and 
  Saturation Vapor Pressure, First Edition, 
  September 1979, API Stock No. 852-30346.
API MPMS, Chapter 14.8, Liquefied Petroleum Gas     250.1; 250.181(c)(1)
Measurement, First Edition, February 1983, API 
[[Page 549]]52-30348.

The American Society for Testing and Materials

  1916 Race Street, Philadelphia, Pennsylvania 
  19103
ASTM Standard C33-86, Standard Specification for                 250.1; 
  Concrete Aggregates, including Nonmandatory           250.138(b)(4)(i)
  Appendix, 1986.
ASTM Standard C33-93, Standard Specification for              250.1(e); 
  Concrete Aggregates including Nonmandatory            250.138(b)(4)(i)
  Appendix.
ASTM Standard C94-86b, Standard Specification for                250.1; 
  Ready-mixed Concrete, 1986.                           250.138(e)(2)(i)
ASTM Standard C94-96, Standard Specification for              250.1(e); 
  Ready-Mixed Concrete.                                 250.138(e)(2)(i)
ASTM Standard C150-86, Standard Specification for                250.1; 
  Portland Cement, 1986.                                250.138(b)(2)(i)
ASTM Standard C150-95a, Standard Specification for            250.1(e); 
  Portland Cement.                                      250.138(b)(2)(i)
ASTM Standard C330-87, Standard Specification for                250.1; 
  Light-weight Aggregates for Structural Concrete.      250.138(b)(4)(i)
ASTM Standard C330-89, Standard Specification for             250.1(e); 
  Light Weight Aggregates for Structural Concrete.      250.138(b)(4)(i)
ASTM Standard C595-86, Standard Specification for                250.1; 
  Blended Hydraulic Cements, 1986.                      250.138(b)(2)(i)
ASTM Standard C595-94, Standard Specification for             250.1(e); 
  Blended Hydraulic Cements.                            250.138(b)(2)(i)


The American Welding Society

  550 NW. LeJeune Road, P.O. Box 351040, Miami, 
  Florida 33135
D1.1-86, Structural Welding Code--Steel, 1986                    250.1; 
  including Commentary.                                 250.137(b)(1)(i)
D1.1-96, Structural Welding Code-Steel, 1996,                 250.1(f); 
  including Commentary.                                 250.137(b)(1)(i)
D1.4-79, Structural Welding Code--Reinforcing                    250.1; 
  Steel, 1979.                                         250.138(e)(3)(ii)


The National Association of Corrosion Engineers

  P.O. Box 218340, Houston, Texas 77218
NACE Standard MR-01-75 (1984 Editorial Revision),                250.1; 
  Material Requirements, Sulfide Stress Cracking      250.67(g)(4)(iv), 
  Resistant Metallic Material for Oil Field        (j)(13)(ii), (l)(1), 
  Equipment, with Supplement 1 issued January       (l)(2), (l)(3), and 
  1985, Supplement 2 issued February 1985,                        (l)(6)
  Supplement 3 issued March 1985, Supplement 4 
  issued May 1985, Supplement 5 issued July 1985, 
  Supplement 6 issued August 1985, Supplement 7 
  issued February 1986, and Supplement 8 issued 
  September 1986.
NACE Standard RP-01-76 (1983 Revision),                250.1; 250.137(d)
  Recommended Practice, Corrosion Control of 
  Steel, Fixed Offshore Platforms Associated with 
  Petroleum Production.
NACE Standard RP-01-76 (1994 Revision) Recommended  250.1(g); 250.137(d)
  Practice, Corrosion Control of Steel Fixed 
  Offshore Platforms Associated with Petroleum 
  Production.



[[Page 551]]



                    Table of CFR Titles and Chapters




                      (Revised as of June 20, 1997)

                      Title 1--General Provisions

         I  Administrative Committee of the Federal Register 
                (Parts 1--49)
        II  Office of the Federal Register (Parts 50--299)
        IV  Miscellaneous Agencies (Parts 400--500)

                          Title 2--[Reserved]

                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  General Accounting Office (Parts 1--99)
        II  Federal Claims Collection Standards (General 
                Accounting Office--Department of Justice) (Parts 
                100--299)

                   Title 5--Administrative Personnel

         I  Office of Personnel Management (Parts 1--1199)
        II  Merit Systems Protection Board (Parts 1200--1299)
       III  Office of Management and Budget (Parts 1300--1399)
        IV  Advisory Committee on Federal Pay (Parts 1400--1499)
         V  The International Organizations Employees Loyalty 
                Board (Parts 1500--1599)
        VI  Federal Retirement Thrift Investment Board (Parts 
                1600--1699)
       VII  Advisory Commission on Intergovernmental Relations 
                (Parts 1700--1799)
      VIII  Office of Special Counsel (Parts 1800--1899)
        IX  Appalachian Regional Commission (Parts 1900--1999)
        XI  Armed Forces Retirement Home (Part 2100)
       XIV  Federal Labor Relations Authority, General Counsel of 
                the Federal Labor Relations Authority and Federal 
                Service Impasses Panel (Parts 2400--2499)
        XV  Office of Administration, Executive Office of the 
                President (Parts 2500--2599)
       XVI  Office of Government Ethics (Parts 2600--2699)
       XXI  Department of the Treasury (Parts 3100--3199)
      XXII  Federal Deposit Insurance Corporation (Part 3201)
     XXIII  Department of Energy (Part 3301)

[[Page 552]]

      XXIV  Federal Energy Regulatory Commission (Part 3401)
      XXVI  Department of Defense (Part 3601)
    XXVIII  Department of Justice (Part 3801)
      XXIX  Federal Communications Commission (Parts 3900--3999)
       XXX  Farm Credit System Insurance Corporation (Parts 4000--
                4099)
      XXXI  Farm Credit Administration (Parts 4100--4199)
    XXXIII  Overseas Private Investment Corporation (Part 4301)
      XXXV  Office of Personnel Management (Part 4501)
        XL  Interstate Commerce Commission (Part 5001)
       XLI  Commodity Futures Trading Commission (Part 5101)
      XLII  Department of Labor (Part 5201)
     XLIII  National Science Foundation (Part 5301)
       XLV  Department of Health and Human Services (Part 5501)
      XLVI  Postal Rate Commission (Part 5601)
     XLVII  Federal Trade Commission (Part 5701)
    XLVIII  Nuclear Regulatory Commission (Part 5801)
         L  Department of Transportation (Part 6001)
       LII  Export-Import Bank of the United States (Part 6201)
      LIII  Department of Education (Parts 6300--6399)
       LIV  Environmental Protection Agency (Part 6401)
      LVII  General Services Administration (Part 6701)
     LVIII  Board of Governors of the Federal Reserve System (Part 
                6801)
       LIX  National Aeronautics and Space Administration (Part 
                6901)
        LX  United States Postal Service (Part 7001)
       LXI  National Labor Relations Board (Part 7101)
      LXII  Equal Employment Opportunity Commission (Part 7201)
     LXIII  Inter-American Foundation (Part 7301)
       LXV  Department of Housing and Urban Development (Part 
                7501)
      LXVI  National Archives and Records Administration (Part 
                7601)
      LXIX  Tennessee Valley Authority (Part 7901)
      LXXI  Consumer Product Safety Commission (Part 8101)
     LXXIV  Federal Mine Safety and Health Review Commission (Part 
                8401)
     LXXVI  Federal Retirement Thrift Investment Board (Part 8601)
    LXXVII  Office of Management and Budget (Part 8701)

                          Title 6--[Reserved]

                         Title 7--Agriculture

            Subtitle A--Office of the Secretary of Agriculture 
                (Parts 0--26)
            Subtitle B--Regulations of the Department of 
                Agriculture
         I  Agricultural Marketing Service (Standards, 
                Inspections, Marketing Practices), Department of 
                Agriculture (Parts 27--209)
        II  Food and Consumer Service, Department of Agriculture 
                (Parts 210--299)

[[Page 553]]

       III  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 300--399)
        IV  Federal Crop Insurance Corporation, Department of 
                Agriculture (Parts 400--499)
         V  Agricultural Research Service, Department of 
                Agriculture (Parts 500--599)
        VI  Natural Resources Conservation Service, Department of 
                Agriculture (Parts 600--699)
       VII  Farm Service Agency, Department of Agriculture (Parts 
                700--799)
      VIII  Grain Inspection, Packers and Stockyards 
                Administration (Federal Grain Inspection Service), 
                Department of Agriculture (Parts 800--899)
        IX  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Fruits, Vegetables, Nuts), Department 
                of Agriculture (Parts 900--999)
         X  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Milk), Department of Agriculture 
                (Parts 1000--1199)
        XI  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Miscellaneous Commodities), Department 
                of Agriculture (Parts 1200--1299)
      XIII  Northeast Dairy Compact Commission (Parts 1300--1399)
       XIV  Commodity Credit Corporation, Department of 
                Agriculture (Parts 1400--1499)
        XV  Foreign Agricultural Service, Department of 
                Agriculture (Parts 1500--1599)
       XVI  Rural Telephone Bank, Department of Agriculture (Parts 
                1600--1699)
      XVII  Rural Utilities Service, Department of Agriculture 
                (Parts 1700--1799)
     XVIII  Rural Housing Service, Rural Business-Cooperative 
                Service, Rural Utilities Service, and Farm Service 
                Agency, Department of Agriculture (Parts 1800--
                2099)
      XXVI  Office of Inspector General, Department of Agriculture 
                (Parts 2600--2699)
     XXVII  Office of Information Resources Management, Department 
                of Agriculture (Parts 2700--2799)
    XXVIII  Office of Operations, Department of Agriculture (Parts 
                2800--2899)
      XXIX  Office of Energy, Department of Agriculture (Parts 
                2900--2999)
       XXX  Office of Finance and Management, Department of 
                Agriculture (Parts 3000--3099)
      XXXI  Office of Environmental Quality, Department of 
                Agriculture (Parts 3100--3199)
     XXXII  [Reserved]
    XXXIII  Office of Transportation, Department of Agriculture 
                (Parts 3300--3399)
     XXXIV  Cooperative State Research, Education, and Extension 
                Service, Department of Agriculture (Parts 3400--
                3499)

[[Page 554]]

      XXXV  Rural Housing Service, Department of Agriculture 
                (Parts 3500--3599)
     XXXVI  National Agricultural Statistics Service, Department 
                of Agriculture (Parts 3600--3699)
    XXXVII  Economic Research Service, Department of Agriculture 
                (Parts 3700--3799)
   XXXVIII  World Agricultural Outlook Board, Department of 
                Agriculture (Parts 3800--3899)
       XLI  [Reserved]
      XLII  Rural Business-Cooperative Service and Rural Utilities 
                Service, Department of Agriculture (Parts 4200--
                4299)

                    Title 8--Aliens and Nationality

         I  Immigration and Naturalization Service, Department of 
                Justice (Parts 1--499)

                 Title 9--Animals and Animal Products

         I  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 1--199)
        II  Grain Inspection, Packers and Stockyards 
                Administration (Packers and Stockyards Programs), 
                Department of Agriculture (Parts 200--299)
       III  Food Safety and Inspection Service, Meat and Poultry 
                Inspection, Department of Agriculture (Parts 300--
                599)

                           Title 10--Energy

         I  Nuclear Regulatory Commission (Parts 0--199)
        II  Department of Energy (Parts 200--699)
       III  Department of Energy (Parts 700--999)
         X  Department of Energy (General Provisions) (Parts 
                1000--1099)
        XI  United States Enrichment Corporation (Parts 1100--
                1199)
        XV  Office of the Federal Inspector for the Alaska Natural 
                Gas Transportation System (Parts 1500--1599)
      XVII  Defense Nuclear Facilities Safety Board (Parts 1700--
                1799)

                      Title 11--Federal Elections

         I  Federal Election Commission (Parts 1--9099)

                      Title 12--Banks and Banking

         I  Comptroller of the Currency, Department of the 
                Treasury (Parts 1--199)
        II  Federal Reserve System (Parts 200--299)
       III  Federal Deposit Insurance Corporation (Parts 300--399)
        IV  Export-Import Bank of the United States (Parts 400--
                499)

[[Page 555]]

         V  Office of Thrift Supervision, Department of the 
                Treasury (Parts 500--599)
        VI  Farm Credit Administration (Parts 600--699)
       VII  National Credit Union Administration (Parts 700--799)
      VIII  Federal Financing Bank (Parts 800--899)
        IX  Federal Housing Finance Board (Parts 900--999)
        XI  Federal Financial Institutions Examination Council 
                (Parts 1100--1199)
       XIV  Farm Credit System Insurance Corporation (Parts 1400--
                1499)
        XV  Thrift Depositor Protection Oversight Board (Parts 
                1500--1599)
      XVII  Office of Federal Housing Enterprise Oversight, 
                Department of Housing and Urban Development (Parts 
                1700-1799)
     XVIII  Community Development Financial Institutions Fund, 
                Department of the Treasury (Parts 1800--1899)

               Title 13--Business Credit and Assistance

         I  Small Business Administration (Parts 1--199)
       III  Economic Development Administration, Department of 
                Commerce (Parts 300--399)

                    Title 14--Aeronautics and Space

         I  Federal Aviation Administration, Department of 
                Transportation (Parts 1--199)
        II  Office of the Secretary, Department of Transportation 
                (Aviation Proceedings) (Parts 200--399)
       III  Commercial Space Transportation, Federal Aviation 
                Administration, Department of Transportation 
                (Parts 400--499)
         V  National Aeronautics and Space Administration (Parts 
                1200--1299)

                 Title 15--Commerce and Foreign Trade

            Subtitle A--Office of the Secretary of Commerce (Parts 
                0--29)
            Subtitle B--Regulations Relating to Commerce and 
                Foreign Trade
         I  Bureau of the Census, Department of Commerce (Parts 
                30--199)
        II  National Institute of Standards and Technology, 
                Department of Commerce (Parts 200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Foreign-Trade Zones Board, Department of Commerce 
                (Parts 400--499)
       VII  Bureau of Export Administration, Department of 
                Commerce (Parts 700--799)
      VIII  Bureau of Economic Analysis, Department of Commerce 
                (Parts 800--899)
        IX  National Oceanic and Atmospheric Administration, 
                Department of Commerce (Parts 900--999)

[[Page 556]]

        XI  Technology Administration, Department of Commerce 
                (Parts 1100--1199)
      XIII  East-West Foreign Trade Board (Parts 1300--1399)
       XIV  Minority Business Development Agency (Parts 1400--
                1499)
            Subtitle C--Regulations Relating to Foreign Trade 
                Agreements
        XX  Office of the United States Trade Representative 
                (Parts 2000--2099)
            Subtitle D--Regulations Relating to Telecommunications 
                and Information
     XXIII  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                2300--2399)

                    Title 16--Commercial Practices

         I  Federal Trade Commission (Parts 0--999)
        II  Consumer Product Safety Commission (Parts 1000--1799)

             Title 17--Commodity and Securities Exchanges

         I  Commodity Futures Trading Commission (Parts 1--199)
        II  Securities and Exchange Commission (Parts 200--399)
        IV  Department of the Treasury (Parts 400--499)

          Title 18--Conservation of Power and Water Resources

         I  Federal Energy Regulatory Commission, Department of 
                Energy (Parts 1--399)
       III  Delaware River Basin Commission (Parts 400--499)
        VI  Water Resources Council (Parts 700--799)
      VIII  Susquehanna River Basin Commission (Parts 800--899)
      XIII  Tennessee Valley Authority (Parts 1300--1399)

                       Title 19--Customs Duties

         I  United States Customs Service, Department of the 
                Treasury (Parts 1--199)
        II  United States International Trade Commission (Parts 
                200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)

                     Title 20--Employees' Benefits

         I  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 1--199)
        II  Railroad Retirement Board (Parts 200--399)
       III  Social Security Administration (Parts 400--499)
        IV  Employees' Compensation Appeals Board, Department of 
                Labor (Parts 500--599)
         V  Employment and Training Administration, Department of 
                Labor (Parts 600--699)

[[Page 557]]

        VI  Employment Standards Administration, Department of 
                Labor (Parts 700--799)
       VII  Benefits Review Board, Department of Labor (Parts 
                800--899)
      VIII  Joint Board for the Enrollment of Actuaries (Parts 
                900--999)
        IX  Office of the Assistant Secretary for Veterans' 
                Employment and Training, Department of Labor 
                (Parts 1000--1099)

                       Title 21--Food and Drugs

         I  Food and Drug Administration, Department of Health and 
                Human Services (Parts 1--1299)
        II  Drug Enforcement Administration, Department of Justice 
                (Parts 1300--1399)
       III  Office of National Drug Control Policy (Parts 1400--
                1499)

                      Title 22--Foreign Relations

         I  Department of State (Parts 1--199)
        II  Agency for International Development, International 
                Development Cooperation Agency (Parts 200--299)
       III  Peace Corps (Parts 300--399)
        IV  International Joint Commission, United States and 
                Canada (Parts 400--499)
         V  United States Information Agency (Parts 500--599)
        VI  United States Arms Control and Disarmament Agency 
                (Parts 600--699)
       VII  Overseas Private Investment Corporation, International 
                Development Cooperation Agency (Parts 700--799)
        IX  Foreign Service Grievance Board Regulations (Parts 
                900--999)
         X  Inter-American Foundation (Parts 1000--1099)
        XI  International Boundary and Water Commission, United 
                States and Mexico, United States Section (Parts 
                1100--1199)
       XII  United States International Development Cooperation 
                Agency (Parts 1200--1299)
      XIII  Board for International Broadcasting (Parts 1300--
                1399)
       XIV  Foreign Service Labor Relations Board; Federal Labor 
                Relations Authority; General Counsel of the 
                Federal Labor Relations Authority; and the Foreign 
                Service Impasse Disputes Panel (Parts 1400--1499)
        XV  African Development Foundation (Parts 1500--1599)
       XVI  Japan-United States Friendship Commission (Parts 
                1600--1699)
      XVII  United States Institute of Peace (Parts 1700--1799)

                          Title 23--Highways

         I  Federal Highway Administration, Department of 
                Transportation (Parts 1--999)
        II  National Highway Traffic Safety Administration and 
                Federal Highway Administration, Department of 
                Transportation (Parts 1200--1299)

[[Page 558]]

       III  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 1300--1399)

                Title 24--Housing and Urban Development

            Subtitle A--Office of the Secretary, Department of 
                Housing and Urban Development (Parts 0--99)
            Subtitle B--Regulations Relating to Housing and Urban 
                Development
         I  Office of Assistant Secretary for Equal Opportunity, 
                Department of Housing and Urban Development (Parts 
                100--199)
        II  Office of Assistant Secretary for Housing-Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 200--299)
       III  Government National Mortgage Association, Department 
                of Housing and Urban Development (Parts 300--399)
         V  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 500--599)
        VI  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 600--699) [Reserved]
       VII  Office of the Secretary, Department of Housing and 
                Urban Development (Housing Assistance Programs and 
                Public and Indian Housing Programs) (Parts 700--
                799)
      VIII  Office of the Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Section 8 Housing Assistance 
                Programs and Section 202 Direct Loan Program) 
                (Parts 800--899)
        IX  Office of Assistant Secretary for Public and Indian 
                Housing, Department of Housing and Urban 
                Development (Parts 900--999)
         X  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Interstate Land Sales 
                Registration Program) (Parts 1700--1799)
       XII  Office of Inspector General, Department of Housing and 
                Urban Development (Parts 2000--2099)
        XX  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 3200--3899)
       XXV  Neighborhood Reinvestment Corporation (Parts 4100--
                4199)

                           Title 25--Indians

         I  Bureau of Indian Affairs, Department of the Interior 
                (Parts 1--299)
        II  Indian Arts and Crafts Board, Department of the 
                Interior (Parts 300--399)
       III  National Indian Gaming Commission, Department of the 
                Interior (Parts 500--599)
        IV  Office of Navajo and Hopi Indian Relocation (Parts 
                700--799)

[[Page 559]]

         V  Bureau of Indian Affairs, Department of the Interior, 
                and Indian Health Service, Department of Health 
                and Human Services (Part 900)
        VI  Office of the Assistant Secretary-Indian Affairs, 
                Department of the Interior (Part 1001)
       VII  Office of the Special Trustee for American Indians, 
                Department of the Interior (Part 1200)

                      Title 26--Internal Revenue

         I  Internal Revenue Service, Department of the Treasury 
                (Parts 1--799)

           Title 27--Alcohol, Tobacco Products and Firearms

         I  Bureau of Alcohol, Tobacco and Firearms, Department of 
                the Treasury (Parts 1--299)

                   Title 28--Judicial Administration

         I  Department of Justice (Parts 0--199)
       III  Federal Prison Industries, Inc., Department of Justice 
                (Parts 300--399)
         V  Bureau of Prisons, Department of Justice (Parts 500--
                599)
        VI  Offices of Independent Counsel, Department of Justice 
                (Parts 600--699)
       VII  Office of Independent Counsel (Parts 700--799)

                            Title 29--Labor

            Subtitle A--Office of the Secretary of Labor (Parts 
                0--99)
            Subtitle B--Regulations Relating to Labor
         I  National Labor Relations Board (Parts 100--199)
        II  Office of Labor-Management Standards, Department of 
                Labor (Parts 200--299)
       III  National Railroad Adjustment Board (Parts 300--399)
        IV  Office of Labor-Management Standards, Department of 
                Labor (Parts 400--499)
         V  Wage and Hour Division, Department of Labor (Parts 
                500--899)
        IX  Construction Industry Collective Bargaining Commission 
                (Parts 900--999)
         X  National Mediation Board (Parts 1200--1299)
       XII  Federal Mediation and Conciliation Service (Parts 
                1400--1499)
       XIV  Equal Employment Opportunity Commission (Parts 1600--
                1699)
      XVII  Occupational Safety and Health Administration, 
                Department of Labor (Parts 1900--1999)
        XX  Occupational Safety and Health Review Commission 
                (Parts 2200--2499)
       XXV  Pension and Welfare Benefits Administration, 
                Department of Labor (Parts 2500--2599)

[[Page 560]]

     XXVII  Federal Mine Safety and Health Review Commission 
                (Parts 2700--2799)
        XL  Pension Benefit Guaranty Corporation (Parts 4000--
                4999)

                      Title 30--Mineral Resources

         I  Mine Safety and Health Administration, Department of 
                Labor (Parts 1--199)
        II  Minerals Management Service, Department of the 
                Interior (Parts 200--299)
       III  Board of Surface Mining and Reclamation Appeals, 
                Department of the Interior (Parts 300--399)
        IV  Geological Survey, Department of the Interior (Parts 
                400--499)
        VI  Bureau of Mines, Department of the Interior (Parts 
                600--699)
       VII  Office of Surface Mining Reclamation and Enforcement, 
                Department of the Interior (Parts 700--999)

                 Title 31--Money and Finance: Treasury

            Subtitle A--Office of the Secretary of the Treasury 
                (Parts 0--50)
            Subtitle B--Regulations Relating to Money and Finance
         I  Monetary Offices, Department of the Treasury (Parts 
                51--199)
        II  Fiscal Service, Department of the Treasury (Parts 
                200--399)
        IV  Secret Service, Department of the Treasury (Parts 
                400--499)
         V  Office of Foreign Assets Control, Department of the 
                Treasury (Parts 500--599)
        VI  Bureau of Engraving and Printing, Department of the 
                Treasury (Parts 600--699)
       VII  Federal Law Enforcement Training Center, Department of 
                the Treasury (Parts 700--799)
      VIII  Office of International Investment, Department of the 
                Treasury (Parts 800--899)

                      Title 32--National Defense

            Subtitle A--Department of Defense
         I  Office of the Secretary of Defense (Parts 1--399)
         V  Department of the Army (Parts 400--699)
        VI  Department of the Navy (Parts 700--799)
       VII  Department of the Air Force (Parts 800--1099)
            Subtitle B--Other Regulations Relating to National 
                Defense
       XII  Defense Logistics Agency (Parts 1200--1299)
       XVI  Selective Service System (Parts 1600--1699)
       XIX  Central Intelligence Agency (Parts 1900--1999)
        XX  Information Security Oversight Office, National 
                Archives and Records Administration (Parts 2000--
                2099)
       XXI  National Security Council (Parts 2100--2199)

[[Page 561]]

      XXIV  Office of Science and Technology Policy (Parts 2400--
                2499)
     XXVII  Office for Micronesian Status Negotiations (Parts 
                2700--2799)
    XXVIII  Office of the Vice President of the United States 
                (Parts 2800--2899)
      XXIX  Presidential Commission on the Assignment of Women in 
                the Armed Forces (Part 2900)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of Transportation (Parts 1--
                199)
        II  Corps of Engineers, Department of the Army (Parts 
                200--399)
        IV  Saint Lawrence Seaway Development Corporation, 
                Department of Transportation (Parts 400--499)

                          Title 34--Education

            Subtitle A--Office of the Secretary, Department of 
                Education (Parts 1--99)
            Subtitle B--Regulations of the Offices of the 
                Department of Education
         I  Office for Civil Rights, Department of Education 
                (Parts 100--199)
        II  Office of Elementary and Secondary Education, 
                Department of Education (Parts 200--299)
       III  Office of Special Education and Rehabilitative 
                Services, Department of Education (Parts 300--399)
        IV  Office of Vocational and Adult Education, Department 
                of Education (Parts 400--499)
         V  Office of Bilingual Education and Minority Languages 
                Affairs, Department of Education (Parts 500--599)
        VI  Office of Postsecondary Education, Department of 
                Education (Parts 600--699)
       VII  Office of Educational Research and Improvement, 
                Department of Education (Parts 700--799)
        XI  National Institute for Literacy (Parts 1100-1199)
            Subtitle C--Regulations Relating to Education
       XII  National Council on Disability (Parts 1200--1299)

                        Title 35--Panama Canal

         I  Panama Canal Regulations (Parts 1--299)

             Title 36--Parks, Forests, and Public Property

         I  National Park Service, Department of the Interior 
                (Parts 1--199)
        II  Forest Service, Department of Agriculture (Parts 200--
                299)
       III  Corps of Engineers, Department of the Army (Parts 
                300--399)
        IV  American Battle Monuments Commission (Parts 400--499)
         V  Smithsonian Institution (Parts 500--599)
       VII  Library of Congress (Parts 700--799)

[[Page 562]]

      VIII  Advisory Council on Historic Preservation (Parts 800--
                899)
        IX  Pennsylvania Avenue Development Corporation (Parts 
                900--999)
        XI  Architectural and Transportation Barriers Compliance 
                Board (Parts 1100--1199)
       XII  National Archives and Records Administration (Parts 
                1200--1299)
       XIV  Assassination Records Review Board (Parts 1400-1499)

             Title 37--Patents, Trademarks, and Copyrights

         I  Patent and Trademark Office, Department of Commerce 
                (Parts 1--199)
        II  Copyright Office, Library of Congress (Parts 200--299)
        IV  Assistant Secretary for Technology Policy, Department 
                of Commerce (Parts 400--499)
         V  Under Secretary for Technology, Department of Commerce 
                (Parts 500--599)

           Title 38--Pensions, Bonuses, and Veterans' Relief

         I  Department of Veterans Affairs (Parts 0--99)

                       Title 39--Postal Service

         I  United States Postal Service (Parts 1--999)
       III  Postal Rate Commission (Parts 3000--3099)

                  Title 40--Protection of Environment

         I  Environmental Protection Agency (Parts 1--799)
         V  Council on Environmental Quality (Parts 1500--1599)

          Title 41--Public Contracts and Property Management

            Subtitle B--Other Provisions Relating to Public 
                Contracts
        50  Public Contracts, Department of Labor (Parts 50-1--50-
                999)
        51  Committee for Purchase From People Who Are Blind or 
                Severely Disabled (Parts 51-1--51-99)
        60  Office of Federal Contract Compliance Programs, Equal 
                Employment Opportunity, Department of Labor (Parts 
                60-1--60-999)
        61  Office of the Assistant Secretary for Veterans 
                Employment and Training, Department of Labor 
                (Parts 61-1--61-999)
            Subtitle C--Federal Property Management Regulations 
                System
       101  Federal Property Management Regulations (Parts 101-1--
                101-99)
       105  General Services Administration (Parts 105-1--105-999)
       109  Department of Energy Property Management Regulations 
                (Parts 109-1--109-99)
       114  Department of the Interior (Parts 114-1--114-99)
       115  Environmental Protection Agency (Parts 115-1--115-99)
       128  Department of Justice (Parts 128-1--128-99)

[[Page 563]]

            Subtitle D--Other Provisions Relating to Property 
                Management [Reserved]
            Subtitle E--Federal Information Resources Management 
                Regulations System
       201  Federal Information Resources Management Regulation 
                (Parts 201-1--201-99) [Reserved]
            Subtitle F--Federal Travel Regulation System
       301  Travel Allowances (Parts 301-1--301-99)
       302  Relocation Allowances (Parts 302-1--302-99)
       303  Payment of Expenses Connected with the Death of 
                Certain Employees (Parts 303-1--303-2)
       304  Payment from a Non-Federal Source for Travel Expenses 
                (Parts 304-1--304-99)

                        Title 42--Public Health

         I  Public Health Service, Department of Health and Human 
                Services (Parts 1--199)
        IV  Health Care Financing Administration, Department of 
                Health and Human Services (Parts 400--499)
         V  Office of Inspector General-Health Care, Department of 
                Health and Human Services (Parts 1000--1999)

                   Title 43--Public Lands: Interior

            Subtitle A--Office of the Secretary of the Interior 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Lands
         I  Bureau of Reclamation, Department of the Interior 
                (Parts 200--499)
        II  Bureau of Land Management, Department of the Interior 
                (Parts 1000--9999)
       III  Utah Reclamation Mitigation and Conservation 
                Commission (Parts 10000--10005)

             Title 44--Emergency Management and Assistance

         I  Federal Emergency Management Agency (Parts 0--399)
        IV  Department of Commerce and Department of 
                Transportation (Parts 400--499)

                       Title 45--Public Welfare

            Subtitle A--Department of Health and Human Services 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Welfare
        II  Office of Family Assistance (Assistance Programs), 
                Administration for Children and Families, 
                Department of Health and Human Services (Parts 
                200--299)
       III  Office of Child Support Enforcement (Child Support 
                Enforcement Program), Administration for Children 
                and Families, Department of Health and Human 
                Services (Parts 300--399)

[[Page 564]]

        IV  Office of Refugee Resettlement, Administration for 
                Children and Families Department of Health and 
                Human Services (Parts 400--499)
         V  Foreign Claims Settlement Commission of the United 
                States, Department of Justice (Parts 500--599)
        VI  National Science Foundation (Parts 600--699)
       VII  Commission on Civil Rights (Parts 700--799)
      VIII  Office of Personnel Management (Parts 800--899)
         X  Office of Community Services, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 1000--1099)
        XI  National Foundation on the Arts and the Humanities 
                (Parts 1100--1199)
       XII  ACTION (Parts 1200--1299)
      XIII  Office of Human Development Services, Department of 
                Health and Human Services (Parts 1300--1399)
       XVI  Legal Services Corporation (Parts 1600--1699)
      XVII  National Commission on Libraries and Information 
                Science (Parts 1700--1799)
     XVIII  Harry S. Truman Scholarship Foundation (Parts 1800--
                1899)
       XXI  Commission on Fine Arts (Parts 2100--2199)
      XXII  Christopher Columbus Quincentenary Jubilee Commission 
                (Parts 2200--2299)
     XXIII  Arctic Research Commission (Part 2301)
      XXIV  James Madison Memorial Fellowship Foundation (Parts 
                2400--2499)
       XXV  Corporation for National and Community Service (Parts 
                2500--2599)

                          Title 46--Shipping

         I  Coast Guard, Department of Transportation (Parts 1--
                199)
        II  Maritime Administration, Department of Transportation 
                (Parts 200--399)
        IV  Federal Maritime Commission (Parts 500--599)

                      Title 47--Telecommunication

         I  Federal Communications Commission (Parts 0--199)
        II  Office of Science and Technology Policy and National 
                Security Council (Parts 200--299)
       III  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                300--399)

           Title 48--Federal Acquisition Regulations System

         1  Federal Acquisition Regulation (Parts 1--99)
         2  Department of Defense (Parts 200--299)
         3  Department of Health and Human Services (Parts 300--
                399)

[[Page 565]]

         4  Department of Agriculture (Parts 400--499)
         5  General Services Administration (Parts 500--599)
         6  Department of State (Parts 600--699)
         7  Agency for International Development (Parts 700--799)
         8  Department of Veterans Affairs (Parts 800--899)
         9  Department of Energy (Parts 900--999)
        10  Department of the Treasury (Parts 1000--1099)
        12  Department of Transportation (Parts 1200--1299)
        13  Department of Commerce (Parts 1300--1399)
        14  Department of the Interior (Parts 1400--1499)
        15  Environmental Protection Agency (Parts 1500--1599)
        16  Office of Personnel Management Federal Employees 
                Health Benefits Acquisition Regulation (Parts 
                1600--1699)
        17  Office of Personnel Management (Parts 1700--1799)
        18  National Aeronautics and Space Administration (Parts 
                1800--1899)
        19  United States Information Agency (Parts 1900--1999)
        20  Nuclear Regulatory Commission (Parts 2000--2099)
        21  Office of Personnel Management, Federal Employees 
                Group Life Insurance Federal Acquisition 
                Regulation (Parts 2100--2199)
        23  Social Security Administration (Parts 2300--2399)
        24  Department of Housing and Urban Development (Parts 
                2400--2499)
        25  National Science Foundation (Parts 2500--2599)
        28  Department of Justice (Parts 2800--2899)
        29  Department of Labor (Parts 2900--2999)
        34  Department of Education Acquisition Regulation (Parts 
                3400--3499)
        35  Panama Canal Commission (Parts 3500--3599)
        44  Federal Emergency Management Agency (Parts 4400--4499)
        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199)
        52  Department of the Navy Acquisition Regulations (Parts 
                5200--5299)
        53  Department of the Air Force Federal Acquisition 
                Regulation Supplement (Parts 5300--5399)
        54  Defense Logistics Agency, Department of Defense (Part 
                5452)
        57  African Development Foundation (Parts 5700--5799)
        61  General Services Administration Board of Contract 
                Appeals (Parts 6100--6199)
        63  Department of Transportation Board of Contract Appeals 
                (Parts 6300--6399)
        99  Cost Accounting Standards Board, Office of Federal 
                Procurement Policy, Office of Management and 
                Budget (Parts 9900--9999)

[[Page 566]]

                       Title 49--Transportation

            Subtitle A--Office of the Secretary of Transportation 
                (Parts 1--99)
            Subtitle B--Other Regulations Relating to 
                Transportation
         I  Research and Special Programs Administration, 
                Department of Transportation (Parts 100--199)
        II  Federal Railroad Administration, Department of 
                Transportation (Parts 200--299)
       III  Federal Highway Administration, Department of 
                Transportation (Parts 300--399)
        IV  Coast Guard, Department of Transportation (Parts 400--
                499)
         V  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 500--599)
        VI  Federal Transit Administration, Department of 
                Transportation (Parts 600--699)
       VII  National Railroad Passenger Corporation (AMTRAK) 
                (Parts 700--799)
      VIII  National Transportation Safety Board (Parts 800--999)
         X  Surface Transportation Board, Department of 
                Transportation (Parts 1000--1399)

                   Title 50--Wildlife and Fisheries

         I  United States Fish and Wildlife Service, Department of 
                the Interior (Parts 1--199)
        II  National Marine Fisheries Service, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 200--299)
       III  International Fishing and Related Activities (Parts 
                300--399)
        IV  Joint Regulations (United States Fish and Wildlife 
                Service, Department of the Interior and National 
                Marine Fisheries Service, National Oceanic and 
                Atmospheric Administration, Department of 
                Commerce); Endangered Species Committee 
                Regulations (Parts 400--499)
         V  Marine Mammal Commission (Parts 500--599)
        VI  Fishery Conservation and Management, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 600--699)

                      CFR Index and Finding Aids

            Subject/Agency Index
            List of Agency Prepared Indexes
            Parallel Tables of Statutory Authorities and Rules
            Acts Requiring Publication in the Federal Register
            List of CFR Titles, Chapters, Subchapters, and Parts
            Alphabetical List of Agencies Appearing in the CFR



[[Page 567]]





           Alphabetical List of Agencies Appearing in the CFR




                      (Revised as of June 20, 1997)

                                                  CFR Title, Subtitle or
                     Agency                               Chapter

ACTION                                            45, XII
Administrative Committee of the Federal Register  1, I
Advanced Research Projects Agency                 32, I
Advisory Commission on Intergovernmental          5, VII
     Relations
Advisory Committee on Federal Pay                 5, IV
Advisory Council on Historic Preservation         36, VIII
African Development Foundation                    22, XV
  Federal Acquisition Regulation                  48, 57
Agency for International Development              22, II
  Federal Acquisition Regulation                  48, 7
Agricultural Marketing Service                    7, I, IX, X, XI
Agricultural Research Service                     7, V
Agriculture Department
  Agricultural Marketing Service                  7, I, IX, X, XI
  Agricultural Research Service                   7, V
  Animal and Plant Health Inspection Service      7, III; 9, I
  Commodity Credit Corporation                    7, XIV
  Cooperative State Research, Education, and      7, XXXIV
       Extension Service
  Economic Research Service                       7, XXXVII
  Energy, Office of                               7, XXIX
  Environmental Quality, Office of                7, XXXI
  Farm Service Agency                             7, VII, XVIII
  Federal Acquisition Regulation                  48, 4
  Federal Crop Insurance Corporation              7, IV
  Finance and Management, Office of               7, XXX
  Food and Consumer Service                       7, II
  Food Safety and Inspection Service              9, III
  Foreign Agricultural Service                    7, XV
  Forest Service                                  36, II
  Grain Inspection, Packers and Stockyards        7, VIII; 9, II
       Administration
  Information Resources Management, Office of     7, XXVII
  Inspector General, Office of                    7, XXVI
  National Agricultural Library                   7, XLI
  National Agricultural Statistics Service        7, XXXVI
  Natural Resources Conservation Service          7, VI
  Operations, Office of                           7, XXVIII
  Rural Business-Cooperative Service              7, XVIII, XLII
  Rural Development Administration                7, XLII
  Rural Housing Service                           7, XVIII, XXXV
  Rural Telephone Bank                            7, XVI
  Rural Utilities Service                         7, XVII, XVIII, XLII
  Secretary of Agriculture, Office of             7, Subtitle A
  Transportation, Office of                       7, XXXIII
  World Agricultural Outlook Board                7, XXXVIII
Air Force Department                              32, VII
  Federal Acquisition Regulation Supplement       48, 53
Alaska Natural Gas Transportation System, Office  10, XV
     of the Federal Inspector
Alcohol, Tobacco and Firearms, Bureau of          27, I
AMTRAK                                            49, VII
American Battle Monuments Commission              36, IV
American Indians, Office of the Special Trustee   25, VII

[[Page 568]]

Animal and Plant Health Inspection Service        7, III; 9, I
Appalachian Regional Commission                   5, IX
Architectural and Transportation Barriers         36, XI
     Compliance Board
Arctic Research Commission                        45, XXIII
Armed Forces Retirement Home                      5, XI
Arms Control and Disarmament Agency, United       22, VI
     States
Army Department                                   32, V
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 51
Assassination Records Review Board                36, XIV
Benefits Review Board                             20, VII
Bilingual Education and Minority Languages        34, V
     Affairs, Office of
Blind or Severely Disabled, Committee for         41, 51
     Purchase From People Who Are
Board for International Broadcasting              22, XIII
Census Bureau                                     15, I
Central Intelligence Agency                       32, XIX
Child Support Enforcement, Office of              45, III
Children and Families, Administration for         45, II, III, IV, X
Christopher Columbus Quincentenary Jubilee        45, XXII
     Commission
Civil Rights, Commission on                       45, VII
Civil Rights, Office for                          34, I
Coast Guard                                       33, I; 46, I; 49, IV
Commerce Department                               44, IV
  Census Bureau                                   15, I`
  Economic Affairs, Under Secretary               37, V
  Economic Analysis, Bureau of                    15, VIII
  Economic Development Administration             13, III
  Emergency Management and Assistance             44, IV
  Export Administration, Bureau of                15, VII
  Federal Acquisition Regulation                  48, 13
  Fishery Conservation and Management             50, VI
  Foreign-Trade Zones Board                       15, IV
  International Trade Administration              15, III; 19, III
  National Institute of Standards and Technology  15, II
  National Marine Fisheries Service               50, II, IV
  National Oceanic and Atmospheric                15, IX; 50, II, III, IV, 
       Administration                             VI
  National Telecommunications and Information     15, XXIII; 47, III
       Administration
  National Weather Service                        15, IX
  Patent and Trademark Office                     37, I
  Productivity, Technology and Innovation,        37, IV
       Assistant Secretary for
  Secretary of Commerce, Office of                15, Subtitle A
  Technology, Under Secretary for                 37, V
  Technology Administration                       15, XI
  Technology Policy, Assistant Secretary for      37, IV
Commercial Space Transportation                   14, III
Commodity Credit Corporation                      7, XIV
Commodity Futures Trading Commission              5, XLI; 17, I
Community Planning and Development, Office of     24, V, VI
     Assistant Secretary for
Community Services, Office of                     45, X
Comptroller of the Currency                       12, I
Construction Industry Collective Bargaining       29, IX
     Commission
Consumer Product Safety Commission                5, LXXI; 16, II
Cooperative State Research, Education, and        7, XXXIV
     Extension Service
Copyright Office                                  37, II
Cost Accounting Standards Board                   48, 99
Council on Environmental Quality                  40, V
Customs Service, United States                    19, I
Defense Contract Audit Agency                     32, I
Defense Department                                5, XXVI; 32, Subtitle A
  Advanced Research Projects Agency               32, I
  Air Force Department                            32, VII
  Army Department                                 32, V; 33, II; 36, III, 
                                                  48, 51

[[Page 569]]

  Defense Intelligence Agency                     32, I
  Defense Logistics Agency                        32, I, XII; 48, 54
  Defense Mapping Agency                          32, I
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 2
  Navy Department                                 32, VI; 48, 52
  Secretary of Defense, Office of                 32, I
Defense Contract Audit Agency                     32, I
Defense Intelligence Agency                       32, I
Defense Logistics Agency                          32, XII; 48, 54
Defense Mapping Agency                            32, I
Defense Nuclear Facilities Safety Board           10, XVII
Delaware River Basin Commission                   18, III
Drug Enforcement Administration                   21, II
East-West Foreign Trade Board                     15, XIII
Economic Affairs, Under Secretary                 37, V
Economic Analysis, Bureau of                      15, VIII
Economic Development Administration               13, III
Economic Research Service                         7, XXXVII
Education, Department of                          5, LIII
  Bilingual Education and Minority Languages      34, V
       Affairs, Office of
  Civil Rights, Office for                        34, I
  Educational Research and Improvement, Office    34, VII
       of
  Elementary and Secondary Education, Office of   34, II
  Federal Acquisition Regulation                  48, 34
  Postsecondary Education, Office of              34, VI
  Secretary of Education, Office of               34, Subtitle A
  Special Education and Rehabilitative Services,  34, III
       Office of
  Vocational and Adult Education, Office of       34, IV
Educational Research and Improvement, Office of   34, VII
Elementary and Secondary Education, Office of     34, II
Employees' Compensation Appeals Board             20, IV
Employees Loyalty Board                           5, V
Employment and Training Administration            20, V
Employment Standards Administration               20, VI
Endangered Species Committee                      50, IV
Energy, Department of                             5, XXIII; 10, II, III, X
  Federal Acquisition Regulation                  48, 9
  Federal Energy Regulatory Commission            5, XXIV; 18, I
  Property Management Regulations                 41, 109
Energy, Office of                                 7, XXIX
Engineers, Corps of                               33, II; 36, III
Engraving and Printing, Bureau of                 31, VI
Enrichment Corporation, United States             10, XI
Environmental Protection Agency                   5, LIV; 40, I
  Federal Acquisition Regulation                  48, 15
  Property Management Regulations                 41, 115
Environmental Quality, Office of                  7, XXXI
Equal Employment Opportunity Commission           5, LXII; 29, XIV
Equal Opportunity, Office of Assistant Secretary  24, I
     for
Executive Office of the President                 3, I
  Administration, Office of                       5, XV
  Environmental Quality, Council on               40, V
  Management and Budget, Office of                25, III, LXXVII; 48, 99
  National Drug Control Policy, Office of         21, III
  National Security Council                       32, XXI; 47, 2
  Presidential Documents                          3
  Science and Technology Policy, Office of        32, XXIV; 47, II
  Trade Representative, Office of the United      15, XX
       States
Export Administration, Bureau of                  15, VII
Export-Import Bank of the United States           5, LII; 12, IV
Family Assistance, Office of                      45, II
Farm Credit Administration                        5, XXXI; 12, VI
Farm Credit System Insurance Corporation          5, XXX; 12, XIV
Farm Service Agency                               7, VII, XVIII
Federal Acquisition Regulation                    48, 1
Federal Aviation Administration                   14, I

[[Page 570]]

  Commercial Space Transportation                 14, III
Federal Claims Collection Standards               4, II
Federal Communications Commission                 5, XXIX; 47, I
Federal Contract Compliance Programs, Office of   41, 60
Federal Crop Insurance Corporation                7, IV
Federal Deposit Insurance Corporation             5, XXII; 12, III
Federal Election Commission                       11, I
Federal Emergency Management Agency               44, I
  Federal Acquisition Regulation                  48, 44
Federal Employees Group Life Insurance Federal    48, 21
     Acquisition Regulation
Federal Employees Health Benefits Acquisition     48, 16
     Regulation
Federal Energy Regulatory Commission              5, XXIV; 18, I
Federal Financial Institutions Examination        12, XI
     Council
Federal Financing Bank                            12, VIII
Federal Highway Administration                    23, I, II; 49, III
Federal Home Loan Mortgage Corporation            1, IV
Federal Housing Enterprise Oversight Office       12, XVII
Federal Housing Finance Board                     12, IX
Federal Inspector for the Alaska Natural Gas      10, XV
     Transportation System, Office of
Federal Labor Relations Authority, and General    5, XIV; 22, XIV
     Counsel of the Federal Labor Relations 
     Authority
Federal Law Enforcement Training Center           31, VII
Federal Maritime Commission                       46, IV
Federal Mediation and Conciliation Service        29, XII
Federal Mine Safety and Health Review Commission  5, LXXIV; 29, XXVII
Federal Pay, Advisory Committee on                5, IV
Federal Prison Industries, Inc.                   28, III
Federal Procurement Policy Office                 48, 99
Federal Property Management Regulations           41, 101
Federal Property Management Regulations System    41, Subtitle C
Federal Railroad Administration                   49, II
Federal Register, Administrative Committee of     1, I
Federal Register, Office of                       1, II
Federal Reserve System                            12, II
  Board of Governors                              5, LVIII
Federal Retirement Thrift Investment Board        5, VI, LXXVI
Federal Service Impasses Panel                    5, XIV
Federal Trade Commission                          5, XLVII; 16, I
Federal Transit Administration                    49, VI
Federal Travel Regulation System                  41, Subtitle F
Finance and Management, Office of                 7, XXX
Fine Arts, Commission on                          45, XXI
Fiscal Service                                    31, II
Fish and Wildlife Service, United States          50, I, IV
Fishery Conservation and Management               50, VI
Food and Drug Administration                      21, I
Food and Consumer Service                         7, II
Food Safety and Inspection Service                9, III
Foreign Agricultural Service                      7, XV
Foreign Assets Control, Office of                 31, V
Foreign Claims Settlement Commission of the       45, V
     United States
Foreign Service Grievance Board                   22, IX
Foreign Service Impasse Disputes Panel            22, XIV
Foreign Service Labor Relations Board             22, XIV
Foreign-Trade Zones Board                         15, IV
Forest Service                                    36, II
General Accounting Office                         4, I, II
General Services Administration                   5, LVII
  Contract Appeals, Board of                      48, 61
  Federal Acquisition Regulation                  48, 5
  Federal Property Management Regulations System  41, 101, 105
  Federal Travel Regulation System                41, Subtitle F
  Payment From a Non-Federal Source for Travel    41, 304
       Expenses
  Payment of Expenses Connected With the Death    41, 303
       of Certain Employees
  Relocation Allowances                           41, 302

[[Page 571]]

  Travel Allowances                               41, 301
Geological Survey                                 30, IV
Government Ethics, Office of                      5, XVI
Government National Mortgage Association          24, III
Grain Inspection, Packers and Stockyards          7, VIII; 9, II
     Administration
Great Lakes Pilotage                              46, III
Harry S. Truman Scholarship Foundation            45, XVIII
Health and Human Services, Department of          5, XLV; 45, Subtitle A
  Child Support Enforcement, Office of            45, III
  Children and Families, Administration for       45, II, III, IV, X
  Community Services, Office of                   45, X
  Family Assistance, Office of                    45, II
  Federal Acquisition Regulation                  48, 3
  Food and Drug Administration                    21, I
  Health Care Financing Administration            42, IV
  Human Development Services, Office of           45, XIII
  Indian Health Service                           25, V
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Health Care Financing Administration              42, IV
Housing and Urban Development, Department of      5, LXV; 24, Subtitle B
  Community Planning and Development, Office of   24, V, VI
       Assistant Secretary for
  Equal Opportunity, Office of Assistant          24, I
       Secretary for
  Federal Acquisition Regulation                  48, 24
  Federal Housing Enterprise Oversight, Office    12, XVII
       of
  Government National Mortgage Association        24, III
  Housing--Federal Housing Commissioner, Office   24, II, VIII, X, XX
       of Assistant Secretary for
  Inspector General, Office of                    24, XII
  Public and Indian Housing, Office of Assistant  24, IX
       Secretary for
  Secretary, Office of                            24, Subtitle A, VII
Housing--Federal Housing Commissioner, Office of  24, II, VIII, X, XX
     Assistant Secretary for
Human Development Services, Office of             45, XIII
Immigration and Naturalization Service            8, I
Independent Counsel, Office of                    28, VII
Indian Affairs, Bureau of                         25, I, V
Indian Affairs, Office of the Assistant           25, VI
     Secretary
Indian Arts and Crafts Board                      25, II
Indian Health Service                             25, V
Information Agency, United States                 22, V
  Federal Acquisition Regulation                  48, 19
Information Resources Management, Office of       7, XXVII
Information Security Oversight Office, National   32, XX
     Archives and Records Administration
Inspector General
  Agriculture Department                          7, XXVI
  Health and Human Services Department            42, V
  Housing and Urban Development Department        24, XII
Institute of Peace, United States                 22, XVII
Inter-American Foundation                         5, LXIII; 22, X
Intergovernmental Relations, Advisory Commission  5, VII
     on
Interior Department
  American Indians, Office of the Special         25, VII
       Trustee
  Endangered Species Committee                    50, IV
  Federal Acquisition Regulation                  48, 14
  Federal Property Management Regulations System  41, 114
  Fish and Wildlife Service, United States        50, I, IV
  Geological Survey                               30, IV
  Indian Affairs, Bureau of                       25, I, V
  Indian Affairs, Office of the Assistant         25, VI
       Secretary
  Indian Arts and Crafts Board                    25, II
  Land Management, Bureau of                      43, II
  Minerals Management Service                     30, II
  Mines, Bureau of                                30, VI
  National Indian Gaming Commission               25, III

[[Page 572]]

  National Park Service                           36, I
  Reclamation, Bureau of                          43, I
  Secretary of the Interior, Office of            43, Subtitle A
  Surface Mining and Reclamation Appeals, Board   30, III
       of
  Surface Mining Reclamation and Enforcement,     30, VII
       Office of
Internal Revenue Service                          26, I
International Boundary and Water Commission,      22, XI
     United States and Mexico, United States 
     Section
International Development, Agency for             22, II
  Federal Acquisition Regulation                  48, 7
International Development Cooperation Agency,     22, XII
     United States
  International Development, Agency for           22, II; 48, 7
  Overseas Private Investment Corporation         5, XXXIII; 22, VII
International Fishing and Related Activities      50, III
International Investment, Office of               31, VIII
International Joint Commission, United States     22, IV
     and Canada
International Organizations Employees Loyalty     5, V
     Board
International Trade Administration                15, III; 19, III
International Trade Commission, United States     19, II
Interstate Commerce Commission                    5, XL
James Madison Memorial Fellowship Foundation      45, XXIV
Japan-United States Friendship Commission         22, XVI
Joint Board for the Enrollment of Actuaries       20, VIII
Justice Department                                5, XXVIII; 28, I
  Drug Enforcement Administration                 21, II
  Federal Acquisition Regulation                  48, 28
  Federal Claims Collection Standards             4, II
  Federal Prison Industries, Inc.                 28, III
  Foreign Claims Settlement Commission of the     45, V
       United States
  Immigration and Naturalization Service          8, I
  Offices of Independent Counsel                  28, VI
  Prisons, Bureau of                              28, V
  Property Management Regulations                 41, 128
Labor Department                                  5, XLII
  Benefits Review Board                           20, VII
  Employees' Compensation Appeals Board           20, IV
  Employment and Training Administration          20, V
  Employment Standards Administration             20, VI
  Federal Acquisition Regulation                  48, 29
  Federal Contract Compliance Programs, Office    41, 60
       of
  Federal Procurement Regulations System          41, 50
  Labor-Management Standards, Office of           29, II, IV
  Mine Safety and Health Administration           30, I
  Occupational Safety and Health Administration   29, XVII
  Pension and Welfare Benefits Administration     29, XXV
  Public Contracts                                41, 50
  Secretary of Labor, Office of                   29, Subtitle A
  Veterans' Employment and Training, Office of    41, 61; 20, IX
       the Assistant Secretary for
  Wage and Hour Division                          29, V
  Workers' Compensation Programs, Office of       20, I
Labor-Management Standards, Office of             29, II, IV
Land Management, Bureau of                        43, II
Legal Services Corporation                        45, XVI
Library of Congress                               36, VII
  Copyright Office                                37, II
Management and Budget, Office of                  5, III, LXXVII; 48, 99
Marine Mammal Commission                          50, V
Maritime Administration                           46, II
Merit Systems Protection Board                    5, II
Micronesian Status Negotiations, Office for       32, XXVII
Mine Safety and Health Administration             30, I
Minerals Management Service                       30, II
Mines, Bureau of                                  30, VI
Minority Business Development Agency              15, XIV
Miscellaneous Agencies                            1, IV

[[Page 573]]

Monetary Offices                                  31, I
National Aeronautics and Space Administration     5, LIX; 14, V
  Federal Acquisition Regulation                  48, 18
National Agricultural Library                     7, XLI
National Agricultural Statistics Service          7, XXXVI
National Archives and Records Administration      5, LXVI; 36, XII
  Information Security Oversight Office           32, XX
National Bureau of Standards                      15, II
National Capital Planning Commission              1, IV
National Commission for Employment Policy         1, IV
National Commission on Libraries and Information  45, XVII
     Science
National and Community Service, Corporation for   45, XXV
National Council on Disability                    34, XII
National Credit Union Administration              12, VII
National Drug Control Policy, Office of           21, III
National Foundation on the Arts and the           45, XI
     Humanities
National Highway Traffic Safety Administration    23, II, III; 49, V
National Indian Gaming Commission                 25, III
National Institute for Literacy                   34, XI
National Institute of Standards and Technology    15, II
National Labor Relations Board                    5, LXI; 29, I
National Marine Fisheries Service                 50, II, IV
National Mediation Board                          29, X
National Oceanic and Atmospheric Administration   15, IX; 50, II, III, IV, 
                                                  VI
National Park Service                             36, I
National Railroad Adjustment Board                29, III
National Railroad Passenger Corporation (AMTRAK)  49, VII
National Science Foundation                       5, XLIII; 45, VI
  Federal Acquisition Regulation                  48, 25
National Security Council                         32, XXI
National Security Council and Office of Science   47, II
     and Technology Policy
National Telecommunications and Information       15, XXIII; 47, III
     Administration
National Transportation Safety Board              49, VIII
National Weather Service                          15, IX
Natural Resources Conservation Service            7, VI
Navajo and Hopi Indian Relocation, Office of      25, IV
Navy Department                                   32, VI
  Federal Acquisition Regulation                  48, 52
Neighborhood Reinvestment Corporation             24, XXV
Northeast Dairy Compact Commission                7, XIII
Nuclear Regulatory Commission                     5, XLVIII; 10, I
  Federal Acquisition Regulation                  48, 20
Occupational Safety and Health Administration     29, XVII
Occupational Safety and Health Review Commission  29, XX
Offices of Independent Counsel                    28, VI
Operations Office                                 7, XXVIII
Overseas Private Investment Corporation           5, XXXIII; 22, VII
Panama Canal Commission                           48, 35
Panama Canal Regulations                          35, I
Patent and Trademark Office                       37, I
Payment From a Non-Federal Source for Travel      41, 304
     Expenses
Payment of Expenses Connected With the Death of   41, 303
     Certain Employees
Peace Corps                                       22, III
Pennsylvania Avenue Development Corporation       36, IX
Pension and Welfare Benefits Administration       29, XXV
Pension Benefit Guaranty Corporation              29, XL
Personnel Management, Office of                   5, I, XXXV; 45, VIII
  Federal Acquisition Regulation                  48, 17
  Federal Employees Group Life Insurance Federal  48, 21
       Acquisition Regulation
  Federal Employees Health Benefits Acquisition   48, 16
       Regulation
Postal Rate Commission                            5, XLVI; 39, III
Postal Service, United States                     5, LX; 39, I
Postsecondary Education, Office of                34, VI
President's Commission on White House             1, IV
   Fellowships
[[Page 574]]

Presidential Commission on the Assignment of      32, XXIX
     Women in the Armed Forces
Presidential Documents                            3
Prisons, Bureau of                                28, V
Productivity, Technology and Innovation,          37, IV
     Assistant Secretary
Public Contracts, Department of Labor             41, 50
Public and Indian Housing, Office of Assistant    24, IX
     Secretary for
Public Health Service                             42, I
Railroad Retirement Board                         20, II
Reclamation, Bureau of                            43, I
Refugee Resettlement, Office of                   45, IV
Regional Action Planning Commissions              13, V
Relocation Allowances                             41, 302
Research and Special Programs Administration      49, I
Rural Business-Cooperative Service                7, XVIII, XLII
Rural Development Administration                  7, XLII
Rural Housing Service                             7, XVIII, XXXV
Rural Telephone Bank                              7, XVI
Rural Utilities Service                           7, XVII, XVIII, XLII
Saint Lawrence Seaway Development Corporation     33, IV
Science and Technology Policy, Office of          32, XXIV
Science and Technology Policy, Office of, and     47, II
     National Security Council
Secret Service                                    31, IV
Securities and Exchange Commission                17, II
Selective Service System                          32, XVI
Small Business Administration                     13, I
Smithsonian Institution                           36, V
Social Security Administration                    20, III; 48, 23
Soldiers' and Airmen's Home, United States        5, XI
Special Counsel, Office of                        5, VIII
Special Education and Rehabilitative Services,    34, III
     Office of
State Department                                  22, I
  Federal Acquisition Regulation                  48, 6
Surface Mining and Reclamation Appeals, Board of  30, III
Surface Mining Reclamation and Enforcement,       30, VII
     Office of
Surface Transportation Board                      49, X
Susquehanna River Basin Commission                18, VIII
Technology Administration                         15, XI
Technology Policy, Assistant Secretary for        37, IV
Technology, Under Secretary for                   37, V
Tennessee Valley Authority                        5, LXIX; 18, XIII
Thrift Depositor Protection Oversight Board       12, XV
Thrift Supervision Office, Department of the      12, V
     Treasury
Trade Representative, United States, Office of    15, XX
Transportation, Department of                     5, L
  Coast Guard                                     33, I; 46, I; 49, IV
  Commercial Space Transportation                 14, III
  Contract Appeals, Board of                      48, 63
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 12
  Federal Aviation Administration                 14, I
  Federal Highway Administration                  23, I, II; 49, III
  Federal Railroad Administration                 49, II
  Federal Transit Administration                  49, VI
  Maritime Administration                         46, II
  National Highway Traffic Safety Administration  23, II, III; 49, V
  Research and Special Programs Administration    49, I
  Saint Lawrence Seaway Development Corporation   33, IV
  Secretary of Transportation, Office of          14, II; 49, Subtitle A
  Surface Transportation Board                    49, X
Transportation, Office of                         7, XXXIII
Travel Allowances                                 41, 301
Treasury Department                               5, XXI; 17, IV
  Alcohol, Tobacco and Firearms, Bureau of        27, I
  Community Development Financial Institutions    12, XVIII
       Fund
  Comptroller of the Currency                     12, I

[[Page 575]]

  Customs Service, United States                  19, I
  Engraving and Printing, Bureau of               31, VI
  Federal Acquisition Regulation                  48, 10
  Federal Law Enforcement Training Center         31, VII
  Fiscal Service                                  31, II
  Foreign Assets Control, Office of               31, V
  Internal Revenue Service                        26, I
  International Investment, Office of             31, VIII
  Monetary Offices                                31, I
  Secret Service                                  31, IV
  Secretary of the Treasury, Office of            31, Subtitle A
  Thrift Supervision, Office of                   12, V
Truman, Harry S. Scholarship Foundation           45, XVIII
United States and Canada, International Joint     22, IV
     Commission
United States and Mexico, International Boundary  22, XI
     and Water Commission, United States Section
United States Enrichment Corporation              10, XI
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs Department                       38, I
  Federal Acquisition Regulation                  48, 8
Veterans' Employment and Training, Office of the  41, 61; 20, IX
     Assistant Secretary for
Vice President of the United States, Office of    32, XXVIII
Vocational and Adult Education, Office of         34, IV
Wage and Hour Division                            29, V
Water Resources Council                           18, VI
Workers' Compensation Programs, Office of         20, I
World Agricultural Outlook Board                  7, XXXVIII

[[Page 577]]

                                     

                                     



                           Redesignation Table



                            Derivation Table                            
------------------------------------------------------------------------
             New section                          Old section           
------------------------------------------------------------------------
                           Subpart A--General                           
                                                                        
------------------------------------------------------------------------
250.0................................  250.0.                           
250.1................................  New Provision.                   
250.2................................  250.2.                           
250.3................................  New Provision.                   
250.4................................  250.10 \1\.                      
250.5................................  250.11 \1\.                      
250.6................................  250.13 \1\.                      
250.7................................  250.18 \1\.                      
250.8................................  250.31 \1\.                      
250.9................................  250.32 \1\.                      
250.10...............................  250.12 \1\.                      
  250.10(d)..........................  New Provision \2\.               
250.11...............................  OCS Order No. 4.                 
250.12...............................  250.12 \1\.                      
250.13...............................  250.35.                          
  250.13(b)..........................  New Provision.                   
250.14...............................  250.53.                          
250.15...............................  250.37; OCS Order No. 1.         
250.16...............................  250.58.                          
250.17...............................  250.90.                          
250.18...............................  250.3; OCS Order No. 12.         
250.19...............................  250.45.                          
 250.20..............................  250.46 \1\.                      
 250.21..............................  250.19.                          
 250.22..............................  OCS Order No. 5, paragraph 1.    
 250.23..............................  250.93.                          
 250.24..............................   250.81.                         
                                                                        
------------------------------------------------------------------------
       Subpart B--Exploration and Development and Production Plans      
                                                                        
------------------------------------------------------------------------
250.30...............................  250.34-1 and -2.                 
250.31...............................  250.34-1 and -2.                 
250.32...............................  250.17; OCS Order No. 11.        
250.33...............................  250.34-1 and -3(a).              
  250.33(d)..........................  New Provision.                   
250.34...............................  250.34-2 and -3(b).              
  250.34(a)(2).......................  New Provision.                   
  250.34(a)(5).......................  New Provision.                   
                                                                        
------------------------------------------------------------------------
               Subpart C--Pollution Prevention and Control              
                                                                        
------------------------------------------------------------------------
250.40...............................  250.43; OCS Order No. 7; OCS     
                                        Order No. 1, paragraph 5.       
250.40(b)(1).........................  New Provision.                   
  250.40(b)(5).......................  New Provision.                   
  250.40(c)(1).......................  New Provision.                   
  250.40(c)(2).......................  New Provision.                   
  250.40(c)(3).......................  New Provision.                   
  250.40(c)(4).......................  New Provision.                   
  250.40(d)..........................  New Provision.                   
  250.41.............................  OCS Order No. 7.                 
  250.42.............................  250.43; OCS Order No. 7.         
  250.42(b)..........................  New Provision.                   
  250.42(c)..........................  New Provision.                   
  250.42(d)..........................  New Provision.                   
  250.42(i)..........................  New Provision.                   
  250.42(j)..........................  New Provision.                   
250.43...............................  OCS Order No. 7.                 
250.44...............................  250.2 \1\.                       
250.45...............................  250.57-1 \1\.                    
250.46...............................  250.57-2 \1\.                    
                                                                        
------------------------------------------------------------------------
                     Subpart D--Drilling Operations                     
                                                                        
------------------------------------------------------------------------
250.50...............................  250.30; 250.42; 250.46.          
250.51...............................  .................................
  250.51(a)..........................  OCS Order No. 2, paragraph 2,    
                                        Alaska OCS Order.               
  250.51(b)..........................  New Provision.                   
  250.51(c)..........................  OCS Order No. 2, paragraph 2.4.  
  250.51(d)..........................  OCS Order No. 2, paragraph 2.3.  
  250.51(e)..........................  250.39; 250.40; OCS Order No. 2, 
                                        paragraph 4.                    
  250.51(f)..........................  OCS Order No. 8.                 
  250.51(g)..........................  OCS Order No. 5, paragraph 7.    
  250.51(h)..........................  OCS Order No. 5, paragraph 5.3.  
  250.51(i)..........................  OCS Order No. 5, paragraph 5.3.  
250.52...............................  OCS Order No. 2, Alaska OCS      
                                        Region, paragraph 2.1.6, OCS    
                                        Order No. 5, paragraph 5.4.     
250.53...............................  OCS Order No. 2, Alaska OCS      
                                        Region, paragraphs 12 (a), (b), 
                                        (e), and (f); OCS Order No. 5,  
                                        paragraph 5.1.10.               
250.54...............................  250.41; OCS Order No. 2,         
                                        paragraph 3.                    
250.55...............................  OCS Order No. 2, paragraph 3.6.  
250.56...............................  250.41; OCS Order No. 2,         
                                        paragraph 5.                    
250.57...............................  OCS Order No. 2, paragraph 5.7.  
250.58...............................  OCS Order No. 2, paragraph 5.9.  
250.59...............................  OCS Order No. 2, paragraphs 5.2, 
                                        5.3, 5.4.1, and 5.5.            
250.60...............................  250.41; OCS Order No. 2,         
                                        paragraph 6.                    
250.61...............................  250.44.                          
250.62...............................  250.11; OCS Order No. 2,         
                                        paragraph 10.                   
250.63...............................  250.41; OCS Order No. 2,         
                                        paragraph 7.                    
250.64...............................  250.36; OCS Order No. 2,         
                                        paragraphs 1.2 and 2.           
250.65...............................  250.92.                          
250.66...............................  250.38; 250.92; 250.95.          
250.67...............................  OCS Order No. 2, paragraph 8; GSS-
                                        OCS-1.                          
                                                                        
------------------------------------------------------------------------

[[Page 578]]

                                                                        
                  Subpart E--Well Completion Operations                 
                                                                        
------------------------------------------------------------------------
250.70...............................  New Provision.                   
250.71...............................  New Provision.                   
250.72...............................  New Provision.                   
250.73...............................  New Provision.                   
250.74...............................  New Provision.                   
250.75...............................  New Provision.                   
250.76...............................  New Provision.                   
250.77...............................  New Provision.                   
250.78...............................  New Provision.                   
250.79...............................  New Provision.                   
250.80...............................  New Provision.                   
250.81...............................  New Provision.                   
250.82...............................  New Provision.                   
250.83...............................  250.92.                          
250.84...............................  New Provision.                   
250.85...............................  New Provision.                   
250.86...............................  New Provision.                   
250.87...............................  OCS Order No. 6, paragraphs 1 and
                                        2.                              
                                                                        
------------------------------------------------------------------------
                   Subpart F--Well-Workover Operations                  
                                                                        
------------------------------------------------------------------------
250.90...............................  New Provision.                   
250.91...............................  New Provision.                   
250.92...............................  New Provision.                   
250.93...............................  New Provision.                   
250.94...............................  New Provision.                   
250.95...............................  New Provision.                   
250.96...............................  New Provision.                   
250.97...............................  New Provision.                   
250.98...............................  New Provision.                   
250.99...............................  New Provision.                   
250.100..............................  New Provision.                   
250.101..............................  New Provision.                   
250.102..............................  New Provision.                   
250.103..............................  250.92.                          
250.104..............................  New Provision.                   
250.105..............................  New Provision.                   
250.106..............................  New Provision.                   
250.107..............................  OCS Order No. 6, paragraphs 1 and
                                        2.                              
250.108..............................  New Provision.                   
                                                                        
------------------------------------------------------------------------
                     Subpart G--Abandonment of Wells                    
                                                                        
------------------------------------------------------------------------
250.110..............................  250.15; 250.44; OCS Order No. 3. 
250.111..............................  250.44; 250.92; OCS Order No. 3. 
250.112..............................  OCS Order No. 3.                 
250.113..............................  OCS Order No. 1, OCS Order No. 3.
250.114..............................  250.92; OCS Order No. 3.         
                                                                        
------------------------------------------------------------------------
                  Subpart H--Production Safety Systems                  
                                                                        
------------------------------------------------------------------------
250.120..............................  OCS Order No. 5.                 
250.121..............................  250.41; OCS Order No. 5,         
                                        paragraph 3.                    
250.122..............................  250.41(b); OCS Order No. 5,      
                                        paragraph 4.                    
250.123..............................  OCS Order No. 5, paragraph 5.    
250.124..............................  OCS Order No. 5, paragraphs 5.5  
                                        and 5.6.                        
250.125..............................  OCS Order No. 5, paragraph 5.7   
                                        \1\.                            
250.126..............................  OCS Order No. 5, paragraph 2.    
250.127..............................  New Provision.                   
                                                                        
------------------------------------------------------------------------
                   Subpart I--Platforms and Structures                  
                                                                        
------------------------------------------------------------------------
250.130..............................  OCS Order No. 8, paragraph 1.    
  250.130(g).........................  New Provision.                   
250.131..............................  OCS Order No. 8, paragraphs 2 and
                                        3.                              
250.132..............................  OCS Order No. 8, paragraphs      
                                        1.4.1, 3.2.2, 3.3, and 3.4.     
250.133..............................  OCS Order No. 8, paragraph 1.4.1.
250.134..............................  OCS Order No. 8, paragraph 1.4.2.
250.135..............................  OCS Order No. 8, paragraph 1.4.2.
250.136..............................  OCS Order No. 8, paragraph 1.4.2.
250.137..............................  OCS Order No. 8, paragraph 1.4.2.
250.138..............................  OCS Order No. 8, paragraph 1.4.2.
250.139..............................  OCS Order No. 8, paragraph 1.4.2.
250.140..............................  OCS Order No. 8, paragraph 1.4.2.
250.141..............................  OCS Order No. 8, paragraph 1.4.2.
250.142..............................  New Provision.                   
250.143..............................  OCS Order No. 3, paragraph 2.9.  
250.144..............................  OCS Order No. 8, paragraph 4.    
                                                                        
------------------------------------------------------------------------
             Subpart J--Pipelines and Pipeline Rights-of-Way            
                                                                        
------------------------------------------------------------------------
250.150..............................  250.20; 256.8(a).                
  250.150(a).........................  New Provision.                   
  250.150(c).........................  New Provision.                   
250.151..............................  New Provision.                   
250.152..............................  OCS Order No. 9.                 
  250.152(a).........................  New Provision.                   
  250.152(b).........................  New Provision.                   
  250.152(c).........................  New Provision.                   
  250.152(d).........................  New Provision.                   
  250.152(f).........................  New Provision.                   
250.153..............................  OCS Order No. 9, paragraph 1.C.  
  250.153(a)(2)......................  New Provision.                   
  250.153(a)(3)......................  New Provision.                   
  250.153(a)(4)......................  New Provision.                   
  250.153(b).........................  New Provision.                   
  250.153(c).........................  New Provision.                   
250.154..............................  OCS Order No. 9, paragraphs      
                                        1.A(2) (a) and (c).             
  250.154(a).........................  New Provision.                   
  250.154(b)(6)......................  New Provision.                   
  250.154(b)(7)......................  New Provision.                   
  250.154(b)(8)......................  New Provision.                   
  250.154(b)(9)......................  New Provision.                   
  250.154(c).........................  New Provision.                   
250.155..............................  OCS Order No. 9, paragraph 1.E.  
  250.155(b).........................  New Provision.                   
250.156..............................  New Provision.                   
250.157..............................  OCS Order No. 9, paragraph 2.    
  250.157(a)(5)......................  New Provision.                   
  250.157(b).........................  New Provision.                   
250.158..............................  256.95; OCS Order No. 9,         
                                        paragraph 1.E.                  
  250.158(a).........................  New Provision.                   
  250.158(c).........................  New Provision.                   
  250.158(d).........................  New Provision.                   
  250.150(f).........................  New Provision.                   
  250.158(g).........................  New Provision.                   
  250.158(h).........................  New Provision.                   
250.159..............................  256.83; 256.89 \1\; 256.101.     
250.160..............................  256.92; 256.94; 256.100.         
  250.160(d).........................  New Provision.                   
250.161..............................  256.85; 256.92; 256.94.          
250.162..............................  256.95.                          
250.163..............................  256.97.                          
250.164..............................  256.98.                          
                                                                        
------------------------------------------------------------------------
                       Subpart K--Production Rates                      
                                                                        
------------------------------------------------------------------------
250.170..............................  OCS Order No. 11, paragraph 1.   
250.171..............................  OCS Order No. 11, paragraphs 2   
                                        and 14.                         

[[Page 579]]

                                                                        
  250.171(a).........................  New Provision.                   
  250.171(c).........................  New Provision.                   
250.172..............................  250.16; OCS Order No. 11,        
                                        paragraphs 3 and 4.             
  250.172(a)(1)......................  New Provision.                   
  250.172(a)(3)......................  New Provision.                   
  250.172(a)(5)......................  New Provision.                   
  250.172(a)(7)......................  New Provision.                   
  250.172(a)(8)......................  New Provision.                   
  250.172(b)(3)......................  New Provision.                   
  250.172(b)(4)......................  New Provision.                   
  250.172(b)(5)......................  New Provision.                   
  250.172(c).........................  New Provision.                   
250.173..............................  250.39; OCS Order No. 11,        
                                        paragraphs 5, 6, 7, and 8.      
250.174..............................  OCS Order No. 11, paragraph 9.   
  250.174(a).........................  New Provision.                   
250.175..............................  250.55; OCS Order No. 11,        
                                        paragraph 10; NTL 75-9 (5/13/   
                                        75).                            
  250.175(a)(2)(i)...................  New Provision.                   
  250.175(a)(2)(ii)..................  New Provision.                   
  250.175(c).........................  New Provision.                   
250.176..............................  250.68; OCS Order No.11,         
                                        paragraph 12.                   
250.177..............................  OCS Order No. 11, paragraph 15.  
  250.177(b).........................  New Provision.                   
  250.177(c).........................  New Provision.                   
                                                                        
------------------------------------------------------------------------
      Subpart L--Production Measurement, Commingling, and Security      
                                                                        
------------------------------------------------------------------------
250.180..............................  250.60; OCS Order No. 13,        
                                        paragraphs 2, 3, and 4.         
250.181..............................  250.61; OCS Order No. 13,        
                                        paragraph 5.                    
250.182..............................  250.68; OCS Order No. 13,        
                                        paragraph 6 \1\.                
250.183..............................  New Provision.                   
                                                                        
------------------------------------------------------------------------
                         Subpart M--Unitization                         
                                                                        
------------------------------------------------------------------------
250.190..............................  250.50; 10 CFR 390.014(d).       
250.191..............................  OCS Order No. 11, paragraph 16.  
250.192..............................  250.51-1.                        
250.193..............................  250.51-2.                        
250.194..............................  Model Unit Agreement.            
                                                                        
------------------------------------------------------------------------
                    Subpart N--Remedies and Penalties                   
                                                                        
------------------------------------------------------------------------
250.200..............................  250.80-1.                        
  250.200(a)(2)......................  New Provision.                   
250.201..............................  250.80-1.                        
250.202..............................  250.80-1.                        
250.203..............................  250.80-1.                        
250.204..............................  250.80-1.                        
250.205..............................  250.80-1.                        
250.206..............................  250.80-2.                        
                                                                        
------------------------------------------------------------------------
                           Subpart O--Training                          
                                                                        
------------------------------------------------------------------------
250.210..............................  250.42.                          
250.211..............................  250.42.                          
250.212..............................  250.42.                          
                                                                        
------------------------------------------------------------------------
                      Subpart P--Sulphur Operations                     
                                                                        
------------------------------------------------------------------------
250.250..............................  New Provision.                   
------------------------------------------------------------------------
\1\ No substantive change.                                              
\2\ Codification of existing policy.                                    
                                                                        
Note: The following old sections were deleted as unnecessary and        
  redundant with no substantive change intended: 250.1, 250.4, 250.5,   
  250.82, and 250.96.                                                   


[[Page 581]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations which were 
made by documents published in the Federal Register since January 1, 
1986, are enumerated in the following list. Entries indicate the nature 
of the changes effected. Page numbers refer to Federal Register pages. 
The user should consult the entries for chapters and parts as well as 
sections for revisions.
For the period before January 1, 1986, see the ``List of Sections 
Affected, 1949-1963, 1964-1972, 1973-1985'' published in seven separate 
volumes.

                                  1986

30 CFR
                                                                   51 FR
                                                                    Page
Chapter II
210  Authority citation revised.............................15766, 45882
210.10  Table amended..............................................15766
210.53  Redesignated as 210.54; new 210.53 added...................45882
210.54  Redesignated from 210.53...................................45882
210.200--210.203 (Subpart E)  Heading revised; sections added......15766
210.204  Added.....................................................45883
210  (Subpart F) Heading removed; new Subpart F redesignated from 
        210.300--210.301 (Subpart G)...............................15766
210.300--210.301  (Subpart G) Redesignated as Subpart F; new 
        Subpart G heading redesignated from Subpart H heading......15766
210  (Subpart H)  Heading redesignated as Subpart G heading........15766
212  Authority citation revised....................................15766
212.200 (Subpart E)  Heading revised...............................15767
212.200  (a) revised; (b)(1) amended...............................15767
212  (Subpart F) Heading removed; new Subpart F heading 
        redesignated from Subpart G heading........................15767
212  (Subpart G) Heading redesignated as Subpart F heading; new 
        Subpart G heading redesignated from Subpart H heading......15767
212  (Subpart H) Heading redesignated as Subpart G heading.........15767
216  Added..........................................................8175
    Authority citation revised.....................................45883
216.15  Added......................................................45883
218  Authority citation revised.............................15767, 19063
218.40  Redesignated from 218.56; (c) amended and (e) redesignated 
        as (d).....................................................15767
218.56  Redesignated as 218.40 and (c) amended and (e) 
        redesignated as (d); new 218.56 redesignated from 218.57 
                                                                   15767
218.57  Redesignated as 218.56.....................................15767
218.154  (a) and (b) revised.......................................19063
218.200  (Subpart E) Heading revised...............................15767
218  (Subpart F) Heading removed; new Subpart F redesignated from 
        218.300--218.301 (Subpart G)...............................15767
218.300--218.301  (Subpart G) Redesignated as Subpart F; new 
        Subpart G heading redesignated from Subpart H heading......15767

[[Page 582]]

218  (Subpart H) Heading redesignated as Subpart G heading.........15767
251  Authority citation revised....................................17176
251.13  (b) revised................................................17176
252  Authority citation revised....................................17176
252.2  (e) revised.................................................10382
252.3  (b)(1) and (e)(1) revised; (b)(2) and (e)(3) removed; 
        (b)(3) and (e)(4) redesignated as (b)(2) and (e)(3)........17176
256.22  Revised.....................................................6107
256.23--256.25 (Subpart D)  Heading revised; eff. 7-14-86..........21345
256.23  (b) revised; eff. 7-14-86..................................21345
256.26  (a) revised; eff. 7-14-86..................................21345
256.29  (c) amended................................................37178
Chapter IV
402  Added; eff. 10-1-86...........................................20963

                                  1987

30 CFR
                                                                   52 FR
                                                                    Page
Chapter II
206  Authority citation revised.....................................3798
206.100  Revised....................................................3798
208  Revised.......................................................41913
208.2  Corrected...................................................45528
209  Removed.......................................................41918
216  Authority citation revised....................................27546
216.40  (a) and (b) revised; (g) added.............................27546
218  Authority citation revised.....................................5458
    Authority citation revised; eff. 7-27-87.......................24451
    Authority citation revised..............................24451, 27546
218.40  (a) and (b) revised; (e) added.............................27546
    (e) correctly designated.......................................37452
218.51  Revised; eff. 7-27-87......................................23814
218.57  Added; eff. 7-31-87........................................24451
218.100  (a) revised; (c) added; eff. 7-27-87......................23815
218.150  (a) revised; eff. 7-27-87.................................23815
218.152  Revised....................................................5458
218.153  Removed....................................................5458
218.155  (a) revised; (d) removed; (e) and (f) redesignated as (d) 
        and (e); eff. 7-27-87......................................23815
218.156  Added; eff. 7-27-87.......................................23815
218.200  Redesignated as 218.202; new 218.200 added; eff. 7-27-87 
                                                                   23815
218.201  Added; eff. 7-27-87.......................................23815
218.202  Redesignated from 218.200; eff. 7-27-87...................23815
218.300  Revised; eff. 7-27-87.....................................23815
218.301  Redesignated as 218.302; new 218.301 added; eff. 7-27-87 
                                                                   23815
218.302  Redesignated from 218.301; eff. 7-27-87...................23815
250.3  (b) revised.................................................13237
250.45  (c) added; eff. 7-13-87....................................22307
250.93  Revised; eff. 7-27-87......................................23816
251.14-1  (e) added; eff. June 22, 1987 through 6-22-88............23441

                                  1988

30 CFR
                                                                   53 FR
                                                                    Page
Chapter II
202  Heading and authority citation revised.........................1217
    Authority citation revised......................................1270
    Seminars..................................................4011, 8181
202.51--202.53 (Subpart B)  Revised (202.52 and 202.53 
        redesignated from 202.152 and 202.151 and revised)..........1217
202.100--202.101 (Subpart C)  Revised...............................1217
202.100  Removed; new 202.100 redesignated from 202.150 and 
        revised.....................................................1217
202.101  Removed; new 202.101 added.................................1217
202.102  Removed....................................................1217
202.103  Removed....................................................1217
202.150  Redesignated as 202.100 and revised........................1217
202.151  Redesignated as 202.53 and revised.........................1217
202.152  Redesignated as 202.52 and revised.........................1217
202 (Subpart D)  Heading revised....................................1217
202.150--202.152 (Subpart D)  Sections added........................1271
202 (Subpart E)  Heading revised....................................1217

[[Page 583]]

202 (Subpart F)  Heading revised....................................1217
202 (Subpart G)  Heading revised....................................1217
202 (Subpart H)  Heading revised....................................1217
202 (Subpart I)  Heading revised....................................1217
203  Authority citation revised.....................................1218
    Seminars..................................................4011, 8181
203.50 (Subpart B)  Heading revised.................................1218
203.50  Redesignated from 203.150...................................1218
203 (Subpart C)  Heading revised....................................1218
203.100  Removed....................................................1218
203 (Subpart D)  Heading revised....................................1218
203.150  Redesignated as 203.50.....................................1218
203 (Subpart E)  Heading revised....................................1218
203.200  Redesignated as 203.250....................................1218
203.250 (Subpart F)  Heading revised................................1218
203.250  Redesignated from 203.200..................................1218
203 (Subpart G)  Heading revised....................................1218
203 (Subpart H)  Heading revised....................................1218
203 (Subpart I)  Heading revised....................................1218
206  Authority citation revised.............................45084, 45762
206  Seminars.................................................4011, 8181
206.10  Added.......................................................1272
206 (Subpart B)  Heading revised....................................1218
206.100--206.107 (Subpart C)  Heading revised.......................1218
206.100  Revised....................................................1218
206.101  Revised....................................................1218
    Amended........................................................45084
206.102  Revised....................................................1220
    (c)(1) amended.................................................45762
206.103  Removed....................................................1218
    Added...........................................................1221
206.104  Redesignated as 43 CFR Part 3162.7-4.......................1218
    Added...........................................................1222
    (b)(1) corrected...............................................24688
    (a)(2) amended.................................................45762
206.105  Revised....................................................1222
    Information collection requirements.............................4012
    (a)(1)(iii) amended; (c)(2)(viii) and (e)(1) revised...........45762
206.106--206.107  Removed...........................................1272
206.150--206.152 (Subpart D)  Heading revised.......................1218
206.150--206.159 (Subpart D)  Revised...............................1272
206.150  (e) (1) and (2) revised...................................45084
206.151  Amended...................................................45084
206.157  Information collection requirements........................4012
    (b)(5), (c)(2)(viii) and (e)(1) revised........................45762
206.159  Information collection requirements........................4012
    (a)(1)(iii), (c)(1)(iii) and (e)(1) revised....................45762
206 (Subpart E)  Heading revised....................................1218
206 (Subpart F)  Heading revised....................................1218
206 (Subpart G)  Heading revised....................................1218
206.300  Redesignated as 206.350....................................1218
206.301  Redesignated as 206.351....................................1218
    Redesignated from 43 CFR 3597.2................................39461
206.350--206.351 (Subpart H)  Heading revised.......................1218
206.350  Redesignated from 206.300..................................1218
206.351  Redesignated from 206.301..................................1218
206 (Subpart I)  Heading added......................................1218
207  Revised........................................................1225
    Seminars..................................................4011, 8181
208.3  Table revised...............................................34739
208.13  (a) revised................................................34739
210  Seminars.................................................4011, 8181
210.50--210.55 (Subpart B)  Heading revised.........................1226
210.53  (a) revised................................................16412
210.55  Added.......................................................1226
210 (Subpart C)  Heading revised....................................1226
210.100--210.105  Removed...........................................1226
210 (Subpart D)  Heading revised....................................1226
210.150--210.151  Removed...........................................1226

[[Page 584]]

210 (Subpart F)  Heading revised....................................1226
210.300  Redesignated as 210.350....................................1226
210.301  Redesignated as 210.351....................................1226
210 (Subpart G)  Heading revised....................................1226
210.350--210.351 (Subpart H)  Added (210.350 and 210.351 
        redesignated from 210.300 and 210.301)......................1226
210 (Subpart I)  Heading revised....................................1226
216.10  Revised....................................................16412
216.15  Revised....................................................16412
216.40  (c) revised................................................16412
216.50  Added......................................................16412
218  Authority citation revised....................................43201
218.51  (a)(1) amended.............................................43201
218.155  (c) amended...............................................43201
241  Authority citation revised.....................................1218
    Seminars..................................................4011, 8181
241.10  Removed.....................................................1226
241.50--241.53 (Subpart B)  Heading revised.........................1226
241.50  Amended.....................................................1226
241.53  Redesignated from 241.100 and heading revised; (c) removed
                                                                    1226
241 (Subpart C)  Heading revised....................................1226
241.100  Redesignated as 241.53 and heading revised; (c) removed 
                                                                    1226
241 (Subpart D)  Heading revised....................................1226
241 (Subpart E)  Heading redesignated as Subpart F heading; new 
        (Subpart E) heading added...................................1226
241 (Subpart F)  Heading redesignated as Subpart G heading; new 
        (Subpart F) heading redesignated from Subpart E heading.....1226
241 (Subpart G)  Heading redesignated as Subpart H heading; new 
        (Subpart G) heading redesignated from Subpart F heading.....1226
241 (Subpart H)  Heading removed; new (Subpart H) heading 
        redesignated from Subpart G heading.........................1226
241 (Subpart I)  Heading added......................................1226
250  Revised.......................................................10690
    Meetings.......................................................23758
250.1  Introductory text corrected.................................12227
250.30  Corrected..................................................26067
250.33  (b)(19)(i)(A)(5) corrected.................................26067
250.34  (b)(12)(i)(A)(5) corrected.................................26067
250.45  (e) table corrected........................................19856
    (b)(2) corrected...............................................26067
    (d) corrected..................................................26067
250.46  (a)(6) and (b) corrected...................................26067
250.51  (b) (1) and (2) corrected..................................12227
250.123  (b)(1) introductory text corrected........................12227
250.126  (b)(1) corrected..........................................12227
    Waiver.........................................................34493
250.134  (d)(4)(ii) corrected......................................26067
250.135  (d)(2)(iv) correctly revised; (d) (3) and (4) correctly 
        redesignated as (d) (4) and (5); new (d)(3) correctly 
        added......................................................26067
250.136  (b)(3)(i) corrected.......................................26067
250.137  (c)(3)(iv) corrected......................................26067
250.141  (b)(7)(iii)(D) corrected..................................26067
250.153  (a)(4) corrected..........................................12227
250.212  (a) revised...............................................27853
251  Authority citation revised.....................................4391
251.0  (e) amended and (f) added...................................24688
251.1  Revised.....................................................25256
251.5-1  (b) removed...............................................24688
251.5-3  Revised....................................................4392
251.14-1  (d) (1) and (2) and (e) revised; (c)(3) and (d)(3) 
        removed.....................................................4392
256.12  Added......................................................29886
256.26  (a) amended................................................29886
256.83--256.101 (Subpart N)  Removed...............................10777
280  Added.........................................................25256

                                  1989

30 CFR
                                                                   54 FR
                                                                    Page
Chapter II
202  Authority citation revised.....................................1522

[[Page 585]]

    Training seminars..............................................12611
202.250  Redesignated from 203.250 (b) and revised..................1522
203  Authority citation revised.....................................1522
    Training seminars..............................................12611
203.250  (b) redesignated as 202.250 and revised; (c) through (k) 
        removed; section revised....................................1522
203.251  Added......................................................1522
206  Authority citation revised.....................................1522
    Training seminars..............................................12611
    Coal product valuation meeting.................................16105
206.10  Revised.....................................................1522
206.250--206.265 (Subpart F)  Revised...............................1523
210  Authority citation revised.....................................1531
    Training seminars..............................................12611
210.10  Revised.....................................................1531
212  Authority citation revised.....................................1532
    Subparts C, D, F and G headings revised.........................1532
    Subparts H and I headings added.................................1532
    Training seminars..............................................12611
212.200  (b) introductory text revised..............................1532
218.154  (a), (b) introductory text, (1), and (2) amended..........50616
250.3  (b) amended.................................................50616
250.12  (e)(5) amended.............................................50616
250.33  (b)(19) amended............................................50616
250.34  (b)(12) introductory text and (q)(2) amended...............50616
250.51  (g) amended................................................50616
250.53  (c) amended................................................50616
250.79  Amended....................................................50616
250.85  (c)(1) amended.............................................50616
250.86  (a) amended................................................50616
250.100  Amended...................................................50616
250.105  (c)(1) amended............................................50616
250.106  (a) and (b)(2) amended....................................50617
250.107  (d) amended...............................................50617
250.121  (d) introductory text and (2) amended.....................50617
250.126  (a) amended...............................................50617
250.154  (b) (2) and (3) amended...................................50617
250.159  (a)(1) amended............................................50617
250.161  (c)(2) amended............................................50617
250.180  (f)(1) amended............................................50617
250.204  (e) amended...............................................50617
250.206  (a)(4) amended............................................50617
250.210  Introductory text and (b) amended.........................50617
251.5-3  (a) amended...............................................50617
251.6-3  (a) amended...............................................50617
252.5  (a) amended.................................................50617
256.0  Amended.....................................................50617
256.4  Amended......................................................2049
256.5  (d) and (k) revised..........................................2049
256.7  (a) amended.................................................50617
256.37  (d) removed.................................................2049
256.58  (d) removed; (e) through (g) redesignated as (d) through 
        (f).........................................................2049
256.72  Amended....................................................50617
256.73  (a) and (b) amended........................................50617
281  Added..........................................................2049
282  Added..........................................................2067
290  Authority citation revised....................................52797
290.3  (a) redesignated as (a)(1); (a)(2) added....................52797
290.5  Existing text designated as (a); (b) added..................52797
Chapter VI
652  Redesignated from Part 890 (Subchapter S) and revised.........38378

                                  1990

30 CFR
                                                                   55 FR
                                                                    Page
Chapter II
202  Training seminars.......................................7317, 51413
203  Training seminars........................................7317,51413
206  Training seminars........................................7317,51413
    Authority citation revised.....................................35433
206.251  Amended...................................................35433
206.257  (b)(5) removed; (b)(6) redesignated as (b)(5); (b)(1), 
        (5), (c)(3) and (g) revised................................35433
218  Authority citation revised....................................37230
218.50--218.57 (Subpart B)  Authority citation removed.............37230
218.54  Heading and (b) revised....................................37230
218.55  (c) revised................................................37230
218.103  (b) revised...............................................37230
220.21  (a)(2) revised..............................................1210
250.0  (a) amended.................................................47752

[[Page 586]]

250.1  Introductory text, (c)(5) and (d) introductory text 
        revised; (d)(6) and (11) removed; (d)(1) through (5), (7), 
        (8) through (10), and (12) through (46) redesignated as 
        (d)(2) through (6), (9), (11) through (13), and (15) 
        through (49); new (d)(1), (7), (8), (10), and (14) added 
                                                                   10617
    (c)(5) and (d)(1) revised......................................37710
    (d)(3) amended.................................................47752
    (d)(2) and (15) revised........................................51415
250.19  (a) amended................................................47752
250.20  (c) added..................................................47752
250.32  (c) added..................................................47752
250.34  (t) amended................................................47752
250.51  (g) removed; (h) and (i) redesignated as (g) and (h).......47752
250.60  (e) amended................................................47752
250.72  Amended....................................................47752
250.86  (b)(2) amended.............................................47752
250.87  (d) amended................................................47753
250.107  (d) amended...............................................47753
250.123  (b)(1)(iii) and (7) introductory text amended.............47753
250.124  (a)(1)(ii) amended........................................47753
250.126  (c)(1) and (2) revised; (c)(3), (d), (e), and (f) added 
                                                                   10617
    (c)(2), (e)(1) and (3) revised.................................37710
    (e)(2) amended.................................................47753
250.142  (a) revised...............................................51415
250.159  (c)(7)(i) amended.........................................47753
256.7  (d) amended; (e) removed; (f) through (i) redesignated as 
        (e) through (h)............................................32908
256.70  Amended....................................................32908
265  Removed.......................................................32908
266  Removed.......................................................32908
267  Removed.......................................................32908
268  Removed.......................................................32908
 Chapter VI
652.12  Amended....................................................35300
652.18  Correctly designated.......................................35301

                                  1991

30 CFR
                                                                   56 FR
                                                                    Page
Chapter II
202  Authority citation revised....................................57275
    Training seminars..............................................66358
202.350--202.353 (Subpart H)  Added................................57275
203  Training seminars.............................................66358
206  Training seminars.............................................66358
206.152  (a)(1) and (b)(1)(i) revised..............................46530
206.153  (a)(1) revised............................................46530
206.350  Revised...................................................57276
206.351  Revised...................................................57276
206.352  Added.....................................................57278
206.353  Added.....................................................57279
206.354  Added.....................................................57280
206.355  Added.....................................................57281
206.356  Added.....................................................57283
206.357  Added.....................................................57284
206.358  Added.....................................................57285
210  Authority citation revised....................................57286
210.350  Revised...................................................57286
210.351  Revised...................................................57286
210.352  Revised...................................................57286
210.353  Added.....................................................57286
210.354  Added.....................................................57286
210.355  Added.....................................................57286
212  Authority citation revised....................................57286
212.50--212.52 (Subpart B)  Heading revised; authority citation 
        removed....................................................57286
212.350  Added.....................................................57286
212.351  Added.....................................................57286
216  Authority citation revised....................................20127
216.16  Added......................................................20127
220  Training seminar..............................................26032
228.100  (c) added.................................................10512
228.103  Existing text designated as (a) and revised; (b) added....10512
228.105  (a) revised; (c) added....................................10512
228.107  (a) revised...............................................10512
243.3  Heading added................................................5949
243.4  Added........................................................5949
    (b)(1) and (8) corrected........................................9251
250  Evaluation of MMS operating regulations.......................31870
250.0  Introductory text added; (d) through (f) revised.............1914
    (x) added.......................................................2685
    (n) revised....................................................21954
    (y) added......................................................32098
250.1  (c)(1), (2), (3), (d)(3), (9), (11), (12), (13) and (15) 
        revised....................................................32098
250.2  Amended.....................................................32098
250.10  (a)(3) revised; (d) redesignated as (d)(1); (d)(2) added 
                                                                   32099
250.14  (f) added..................................................32099

[[Page 587]]

250.25  Added......................................................20129
250.32  (a) revised................................................32099
250.34  (b)(5) and (8)(i)(B) revised; (b)(9) through (15) 
        redesignated as (b)(11) through (17); new (b)(9) and (10) 
        added......................................................32099
250.40  (a) introductory text revised..............................32099
250.42  Introductory text amended..................................32100
250.43  (a) amended................................................32100
250.44  Amended....................................................32100
250.50--250.67 (Subpart D)  Heading revised........................32100
250.57  (g) revised; (h) added......................................1914
250.70--250.87 (Subpart E)  Heading revised........................32100
250.86  (d) revised; (e) added......................................1915
250.90--250.108 (Subpart F)  Heading revised.......................32100
250.106  (d) revised; (e) added.....................................1915
250.120--250.127 (Subpart H)  Heading revised......................32100
250.154  (b)(1) redesignated as (b)(1)(i); (b)(1)(ii) added........32100
250.170--250.177 (Subpart K)  Heading revised......................32100
250.180--250.183 (Subpart L)  Heading revised......................32100
250.190  (c) revised...............................................32100
250.194  (c) added.................................................32100
250.200  (a)(1) and (b) revised; (c) redesignated as (d); new (c) 
        added......................................................21954
250.203  (a) revised; (b) redesignated as (c); new (b) added.......21955
250.206  Heading and (a)(1) revised................................21955
250.210--250.215 (Subpart O)  Revised...............................2685
250.214  (c)(3) corrected..........................................12423
250.250--250.297 (Subpart P)  Revised..............................32100
260.110  (b) amended...............................................23648

                                  1992

30 CFR
                                                                   57 FR
                                                                    Page
Chapter II
202  Training seminars.............................................13320
206  Training seminars.............................................13320
206.10  Revised....................................................41863
206.254  (b) amended...............................................52720
206.257  (d)(3) amended............................................52720
206.259  (c)(1)(i), (2)(i), (c)(4), (d)(1), (e)(1) and (2) amended
                                                                   52720
206.262  (a)(1) amended............................................41864
    (c)(1)(i), (2)(i), (4), (d)(1), (e)(1) and (2) amended.........52720
206.355  (c)(1)(ii) and (d)(1)(ii) corrected.......................12376
207  Training seminars.............................................13320
    Authority citation revised.....................................41864
207.1  Revised.....................................................41864
208  Authority citation revised....................................41864
208.3  Revised.....................................................41864
210  Authority citation revised....................................41864
210.10  Revised (OMB numbers)......................................41864
210.53  (a) revised................................................41867
210.202  Amended...................................................52720
210.204  (a) revised...............................................41867
216  Authority citation revised....................................41867
216.10  Revised....................................................41867
216.15  (a) revised................................................41867
216.16  (a) revised................................................41867
218.10  Added......................................................41867
218.40  (c) amended................................................52720
218.42  Added......................................................62206
218.51  (f)(1) revised.............................................41868
218.54  (e) added..................................................62206
218.102  (b) revised...............................................41868
    (d) added......................................................62206
218.150  (c) revised...............................................41868
    (e) added......................................................62206
218.155  (d)(3) and (4) revised....................................41868
218.202  (b) revised...............................................41868
    (f) added......................................................62207
218.302  (b) revised...............................................41868
    (f) added......................................................62207
219  Authority citation revised....................................41868
219.102  Revised...................................................41868
220.003  Added.....................................................41868
228  Authority citation revised....................................41868
228.10  Revised....................................................41868
230  Heading revised; text added...................................62207
243  Authority citation revised....................................44997
243.2  Revised.....................................................44997
243.3  Added.......................................................44998
250.153  (c)(4) redesignated as (b)(4).............................26997

[[Page 588]]

Chapter IV
400  Removed.......................................................59916
Chapter VI
609  Removed.......................................................61831
651  Removed.......................................................61832

                                  1993

30 CFR
                                                                   58 FR
                                                                    Page
Chapter II
202  Policy statement..............................................37420
206  Policy statement..............................................37420
207  Authority citation revised....................................64901
207.1  (b) amended.................................................64901
208  Authority citation revised....................................64901
208.2  Amended.....................................................64901
208.3  Revised.....................................................64901
208.6  (a) revised.................................................64901
208.7  (h) amended.................................................64901
208.11  Revised....................................................64901
208.12  (a) amended; (c) and (d) revised...........................64902
208.13  Revised....................................................64902
210  Authority citation revised....................................64902
210.10  (a) table, (b)(3) through (6), (c)(1), (2), (8), (9), 
        (12), (13), (19) and (d) amended; (b)(1) revised; (c)(6), 
        (11), (15) and (17) removed; (c)(7) through (10), (12), 
        (13), (14), (16) and (18) through (23) redesignated as 
        (c)(6) through (19); new (c)(20) added; OMB number.........64902
210.53  (a) and (b) amended........................................64902
210.204  (a) and (b) amended.......................................64902
210.355  (a) and (b) amended.......................................64902
216  Authority citation revised.............................45254, 64903
216.2  Revised.....................................................45254
216.6  Amended.....................................................45254
216.15  (a) and (b) amended........................................64903
216.16  (a) and (b) amended........................................64903
216.20  Revised....................................................45254
216.40  (c) amended................................................64903
216.50  (a) removed; (b) through (e) redesignated as (a) through 
        (d); new (a) revised; new (d)(3) amended...................45254
    (a), (c)(1) and (2) amended....................................64903
216.51  Revised....................................................45254
216.52  Removed; new 216.52 redesignated from 216.53...............64903
216.53  Redesignated as 216.52; new 216.53 redesignated from 
        216.54.....................................................64903
216.54  Revised....................................................45255
    Redesignated as 216.53; new 216.54 redesignated from 216.55....64903
216.55  Revised....................................................45255
    Redesignated as 216.54; new 216.55 redesignated from 216.56....64903
216.56  Revised....................................................45255
    Redesignated as 216.55; new 216.56 redesignated from 216.58....64903
216.57  Removed; new 216.57 added..................................64903
216.58  Revised....................................................45255
    Redesignated as 216.56.........................................64903
216.61  Removed....................................................64903
218  Authority citation revised.............................45438, 64903
218.41  Added......................................................45438
218.51  (a)(1) corrected; CFR correction............................8907
    (f)(2) amended.................................................64903
219.102  Amended...................................................64903
220.003  (b) amended...............................................64903
228.10  (b) amended................................................64903
229  Authority citation revised....................................64903
229.123  (b)(2) and (3)(vii) amended...............................64903
243.4  (b)(2) removed; (b)(3) through (9) redesignated as (b)(2) 
        through (8); new (b)(5) revised; new (b)(8) amended........64903
250.0  (r), (t) and (v) removed; (s), (u), (w), (x) and (y) 
        redesignated as (r) through (v); (o), (p), (q) and new (r) 
        through (u) revised........................................49926
250.18  (d) introductory text revised; (d)(4) through (8) added....44764
    (d)(1), (2) and (3) revised; (d)(4) and (5) added..............49927
250.51  (a)(3) amended.............................................49927
250.64  (a) and (f) introductory text revised......................49927
250.65  (a), (b) and (c) amended...................................49928
250.66  (b) and (e) amended........................................49928

[[Page 589]]

250.83  (a) and (b) introductory text amended; (c) revised; (d) 
        added......................................................49928
250.85  (a) amended................................................49928
250.103  (a), (b) introductory text and (c) introductory text 
        amended; (d) revised.......................................49928
250.105  (a) amended...............................................49928
250.111  Introductory text amended.................................49928
250.114  (b) amended...............................................49928
250.121  (h)(1) amended............................................49928
250.172  (a)(1), (b)(2), (3), (5) and (6) revised; (a)(2), (3), 
        (6), (7) and (8) amended; (a)(9), (b)(8) and (9) added.....49928
250.260  (b)(3) amended............................................49928
250.272  (a) and (c) introductory text amended.....................49928
250.273  (a), (b) and (c) amended..................................49928
250.274  (b) amended...............................................49928
250.282  (a), (b) introductory text, (c)(1) and (2) amended........49928
254  Added; interim; eff. to 2-18-95................................7490
256  Heading revised...............................................45261
    Authority citation revised.....................................45261
256.0--256.12 (Subpart A)  Heading revised.........................45261
256.0  Revised.....................................................45261
256.58  Heading, (a), (c) and (e) revised; (f) redesignated as 
        (h); new (f) and (g) added.................................45261
256.59  Revised....................................................45262
256.61  Revised....................................................45262
256.62  (e) revised................................................45262
Chapter IV
401  Authority citation revised....................................27204
401.3  Amended.....................................................27204
401.4  Revised.....................................................27204
401.6  (c)(2) revised..............................................27204
401.11  (a) and (g) revised........................................27204
401.12  (c) revised................................................27204
401.26  Revised....................................................27204

                                  1994

30 CFR
                                                                   59 FR
                                                                    Page
Chapter II
206  Extraordinary cost provisions.................................17479
216  Authority citation revised....................................38905
216.40  (b) revised................................................38905
218  Authority citation revised.............................14559, 38906
218.40  (b) revised................................................38906
218.202  (c) and (d) revised.......................................14559
218.302  (c) and (d) revised.......................................14559
230  Authority citation revised....................................38363
230.451--230.461 (Subpart J)  Added................................38363
250  Authority citation revised....................................53093
250.2  Amended.....................................................53093
250.18  (d) revised................................................12161
250.26  Added......................................................53093
250.33  (b)(15) and (o) revised....................................53093
250.34  (b)(8)(v)(A) and (s) revised...............................53093
250.157  (a)(5) revised............................................53094
250.159  (c)(4) revised............................................53094
250.211  Amended...................................................64850
250.212  (a)(2) amended............................................64850
250.213  Amended...................................................64850
250.214  Amended...................................................64850
256  Authority citation revised....................................53094
256.23  (b) amended................................................53094
280  Authority citation revised....................................53094
280.2  Amended.....................................................53094
281  Authority citation revised....................................53094
281.12  (c) amended................................................53094

                                  1995

30 CFR
                                                                   60 FR
                                                                    Page
Chapter II
Guidance availability..............................................36711
218.53  Added.......................................................3087
218.203  Added......................................................3087
250  Interpretation.................................................9298
254  Regulation at 58 FR 7490 eff. date extended....................9626

                                  1996

30 CFR
                                                                   61 FR
                                                                    Page
Chapter II
202  Authority citation revised.....................................5490
202.151  (a) revised................................................5490

[[Page 590]]

203  Comment period extension......................................48834
203.1 (Subpart A)  Added; interim..................................27274
    (Subpart A)  Comment period extension..........................40734
203.50--203.56 (Subpart B)  Revised; interim.......................27274
206  Authority citation revised...............................3804, 5455
206.50--206.55 (Subpart B)  Added...................................5455
    (Subpart B)  Comment period extension..........................40734
206.100--206.105 (Subpart C)  Heading revised.......................5462
206.100  (a), (b) and (c) revised...................................5462
206.101  Amended....................................................5462
206.102  (a)(2) removed; (a)(1) redesignated as (a); (d), (i), (k) 
        and (l) revised.............................................5462
206.104  (b)(2) and (d) revised.....................................5462
206.105  (c)(1)(ii), (iii), (v), (vi), (2)(ii), (iii), (v), (vii), 
        (3) and (4) removed; (c)(1)(iv), (2)(iv), (vi) and (viii) 
        redesignated as (c)(1)(ii), (2)(ii), (iii) and (iv); 
        (a)(1)(i), (3), (b)(1), (2)(v), (4), (c)(1)(i), (2)(i), 
        new (ii), new (iii), (d) and (e) revised....................5463
206.106  Added......................................................3804
206.150--206.159 (Subpart D)  Heading revised.......................5464
206.150  Revised....................................................5464
206.151  Amended....................................................5464
206.152  (a)(2), (e)(2), (h), (i), (k) and (l) revised; (a)(3) 
        removed.....................................................5464
206.153  (a)(3) removed; (e)(2), (i), (k) and (l) revised...........5465
206.154  (c)(4) revised.............................................5465
206.155  (b) revised................................................5465
206.156  (c)(3) and (d) revised.....................................5465
206.157  (c)(1)(ii), (iii), (v), (vi), (2)(ii), (iii), (v), (vii), 
        (3) and (4) removed; (c)(1)(iv), (2)(iv), (vi) and (viii) 
        redesignated as (c)(1)(ii), (2)(ii), (iii) and (iv); 
        (a)(1)(i), (3), (b)(1), (2)(v), (4), (c)(1)(i), (2)(i), 
        new (ii), new (iii), (d), (e)(1) and (2) revised............5465
206.158  (c)(3) and (e) revised.....................................5466
206.159  (c)(1)(ii), (iii), (v), (vi), (2)(ii), (iii), (v), (vii), 
        (3) and (4) removed; (c)(1)(iv), (2)(iv), (vi) and (viii) 
        redesignated as (c)(1)(ii), (2)(ii), (iii) and (iv); 
        (a)(1)(i), (3), (b)(1), (2)(v), (c)(1)(i), (2)(i), new 
        (ii), new (iii), (d), (e)(1) and (2) revised................5466
206.160  Added......................................................3804
206.170--206.179 (Subpart E)  Added.................................5467
206.250--206.265 (Subpart F)  Heading revised.......................5479
206.250  (d) removed; (a) and (b) revised...........................5479
206.251  Amended....................................................5479
206.253  (a) and (c) revised........................................5479
206.255  (a) and (b) revised........................................5480
206.256  (a) revised................................................5480
206.257  (a), (d)(2), (h), (j) and (k) revised......................5480
206.258  (c) revised................................................5480
206.259  (c)(1)(ii), (iii), (v), (vi), (2)(ii), (iii), (v), (vii), 
        (3) and (4) removed; (c)(1)(iv), (2)(iv) and (vi) 
        redesignated as (c)(1)(ii), (2)(ii) and (iii); (a)(1), 
        (b)(1), (2)(v), (c)(1)(i), (2)(i), new (ii), new (iii), 
        (d) and (e)(1) revised......................................5480
206.261  (a)(1), (2) and (e) revised................................5481
206.262  (c)(1)(ii), (iii), (v), (vi), (2)(ii), (iii), (v), (vii), 
        (3) and (4) removed; (c)(1)(iv), (2)(iv), (vi) and (viii) 
        redesignated as (c)(1)(ii), (2)(ii), (iii) and (v); 
        (a)(1), (b)(1), (2)(v), (b)(3), (c)(1)(i), (2)(i), new 
        (ii), new (iii), (d) and (e) revised........................5481
206.450--206.464 (Subpart J)  Added.................................5481
250.1  Introductory text amended; (a)(1), (b), (c)(1) through (4), 
        (6), (d), (e)(1) through (5), (f)(1) and (g)(2) revised....60022
250.13  Revised....................................................55887
250.53  (b) revised................................................60024
250.122  (e)(4)(i) introductory text revised.......................60024
250.123  (b)(9)(i) revised.........................................60025
250.126  (c)(3), (e)(2) and (3) revised............................60025

[[Page 591]]

250.137  (b)(1)(ii), (c)(4)(ii) and (vii) revised..................60025
250.138  (b)(4)(i), (6)(i), (7), (8)(i), (9), (10), (c)(3), 
        (d)(1)(v), (5) through (9), (e)(1)(i) and (2)(i) revised 
                                                                   60025
250.175  Revised...................................................25148
250.180  (c)(6)(i), (ii), (v), (vi), (viii)(A), (C), (d)(3)(iv), 
        (v)(B), (f)(2)(i), (ii), (iv), (v) and (vii) revised.......60026
250.181  (c)(1) revised............................................60026
250.291  (b)(3) and (d)(4)(i) revised..............................60026
250.292  (b)(4)(i) revised.........................................60026
256.37  (a) concluding text removed; (a)(2) revised; (a)(3) added 
                                                                   55889
256.47  (e)(2) revised.............................................34732
260  Authority citation revised.....................................3804
260.001  Revised....................................................3804
260.002  Amended....................................................3804
260.102  Amended; interim..........................................12027
260.110  (a)(1)(iii), (2)(iii), (3)(i)(C)(4) and (iii) revised; 
        (a)(5), (6) and (7) added...................................3804
    (d) added; interim.............................................12027

                                  1997

   (Regulations published from January 1, 1997, through July 1, 1997)

30 CFR
                                                                   62 FR
                                                                    Page
Chapter II
218  Authority citation revised....................................19498
218.51  Revised....................................................19498
218.155  (b)(1) amended............................................19499
250  Authority citation revised....................................27954
250.1  (c)(7) and (g)(1) revised....................................3795
      (c)(4) designation corrected, (d)(61) corrected..............33156
250.2  Amended......................................................3795
250.8  Revised; eff. 8-20-97.......................................27954
250.13  (b)(2) corrected...........................................35247
250.19  (a) amended................................................13996
250.33  (b)(2) revised.............................................13996
250.34  (b)(3) revised.............................................13996
250.41  Heading revised; (b) and (c) removed.......................13996
250.42  Removed....................................................13996
250.43  Removed....................................................13996
250.67  Revised.....................................................3795
250.110  Existing text designated as (a); (b) added; eff. 8-20-97 
                                                                   27955
250.124  (a)(3)(i) revised..........................................5331
250.159  (b)(1) revised; eff. 8-20-97..............................27955
250.175  Heading revised; (f) added.................................3800
250.190--250.194 (Subpart M)  Revised...............................5331
250.209--250.232 (Subpart O)  Revised...............................5322
250.214  Corrected..................................................7298
250.228  (a)(4)(i) and (iii) corrected..............................7298
250.229  Corrected..................................................7298
251  Authority citation revised....................................27955
251.6-4  Revised; eff. 8-20-97.....................................27955
254  Revised.......................................................13996
254.9  (d) correctly revised.......................................18041
256.7  (b) through (h) redesignated as (c) through (i); new (b) 
        added; eff. 8-20-97........................................27955
256.47  (f) amended; eff 8-20-97...................................27955
256.52  Redesignated from 256.58 and revised; eff. 8-20-97.........27955
256.53  Redesignated from 256.61; (a) introductory text, (b) 
        introductory text, (e), and (f) added; (a)(1), (b)(1) and 
        (d) revised; eff. 8-20-97..................................27956
256.54  Redesignated from 256.59 and revised; eff. 8-20-97.........27956
256.55  Added; eff. 8-20-97........................................27957
256.56  Added; eff. 8-20-97........................................27957
256.57  Added; eff. 8-20-97........................................27957
256.58  Redesignated as 256.52; eff. 8-20-97.......................27955
    Added; eff. 8-20-97............................................27958
256.59  Redesignated as 256.54; eff. 8-20-97.......................27956
    Added; eff. 8-20-97............................................27958
256.61  Redesignated as 256.53; eff. 8-20-97.......................27956
256.62  Heading, (a), (d) and (e) revised; introductory text and 
        (f) added; eff. 8-20-97....................................27959
256.64  Introductory text and (a) introductory text amended; 
        (a)(2) and (d) through (h) redesignated as (8) and (e) 
        through (i); eff. 8-20-97..................................27959

[[Page 592]]

281  Authority citation revised....................................27960
281.33  (b) introductory text amended; eff. 8-20-97................27960
282  Authority citation revised....................................27960
282.40  (b) amended; eff. 8-20-97..................................27960