[Federal Register Volume 59, Number 81 (Thursday, April 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10120]


[Federal Register: April 28, 1994]


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Part VIII





Department of the Interior





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Bureau of Indian Affairs



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25 CFR Part 226



Leasing of Osage Reservation Lands for Oil and Gas Mining; Final Rule
DEPARTMENT OF THE INTERIOR

Bureau of Indian Affairs

25 CFR Part 226

RIN 1076-AC09


Leasing of Osage Reservation Lands for Oil and Gas Mining

April 8, 1994.
AGENCY: Bureau of Indian Affairs, Interior.

ACTION: Final rule.

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SUMMARY: The Bureau of Indian Affairs (BIA) amends the regulations 
contained in the Code of Federal Regulations to eliminate premium, 
bonus, or other like payments from consideration in the calculation of 
the royalty price for crude oil in Osage County, Oklahoma.

EFFECTIVE DATE: May 31, 1994.

FOR FURTHER INFORMATION CONTACT: Gordon Jackson, Superintendent, Osage 
Agency, Bureau of Indian Affairs, Pawhuska, Oklahoma 74056, telephone 
(918) 287-1032.

SUPPLEMENTARY INFORMATION: The purpose of this final rule is to amend 
25 CFR 226.11(a)(2) to eliminate premium, bonus, or other like payments 
from consideration in the calculation of the royalty price for crude 
oil in Osage County.
    Prior to amendment the regulations were the subject of 
administrative appeals by numerous oil producers over the meaning of: 
``and settlement shall be based on the highest of the bona fide selling 
price, posted or offered price by a major purchaser (as defined in Sec. 
226.1(h) of this Part) in Osage County, who purchases production from 
Osage oil leases.'' The Bureau of Indian Affairs has interpreted that 
language to mean that when a higher price is offered and paid for crude 
oil in Osage County, that price shall be used for royalty computation 
for all oil of the same quality sold in the county. However, there is 
reason to believe that this interpretation has discouraged purchasers 
from offering bonus prices.
    The Interior Board of Indian Appeals (IBIA) issued its decision in 
favor of the producers on February 5, 1993, in Okie Crude Co., et al. 
v. Muskogee Area Director, Bureau of Indian Affairs, IBIA 92-18-A, et 
al. The IBIA concluded that the then existent regulations required a 
producer to pay royalty on the highest price available to that 
producer, whether or not that producer actually received that price. 
Prices not available to a producer would not be used to calculate 
royalties due from that producer. This final rule eliminates the 
language that caused the differences in interpretation that led to the 
appeals to the IBIA.
    This rule was published as a proposed rule on November 5, 1993 (58 
FR 59142). The last day for public comment was January 4, 1994. No 
comments were received.
    It is the consensus of the BIA and the Osage Tribal Council that 
this amendment to 25 CFR 226.11(a)(2) will create a positive economic 
benefit in the form of increased royalty income to the Osage headright 
holders. This rule change removes the existing disincentive to 
purchasers to remain in Osage County resulting from bonus payments paid 
to some producers but not all. The producers in Osage County will now 
have incentive to receive bonus payments, which will increase mineral 
activity in the Osage mineral estate.
    The Department of the Interior has determined that this rule is not 
a significant regulatory action under Executive Order 12866, and 
therefore will not be reviewed by the Office of Management and Budget. 
In addition, the Department of the Interior has determined that this 
rule will not have a significant economic effect on a substantial 
number of small entities under the Regulatory Flexibility Act (5 U.S.C. 
601, et seq.). The amendment may cause small producers to pool their 
oil production in an effort to secure bonus or premium pay. However, 
under the amended rule they will not be penalized for premium pay to 
other lessee/producers.
    In accordance with the Executive Order 12630, the Department has 
determined that this rule does not have significant takings 
implications.
    In accordance with Executive Order No. 12612, the Department has 
determined that this rule does not have significant federalism effects.
    The Department has certified to the Office of Management and Budget 
that these final regulations meet the applicable standards provided in 
Sections 2(a) and 2(b)(2) of Executive Order 12778.
    The Department of the Interior has determined that this final rule 
does not constitute a major Federal action significantly affecting the 
quality of the human environment and that no detailed statement is 
required pursuant to the National Environmental Policy Act of 1969.
    The information collections contained in 25 CFR Part 226 are 
required by the Secretary , Department of the Interior, and are 
necessary to comply with the requirements of Office of Management and 
Budget (OMB) Circular No. A-102. The Standard Form 424 and attachments 
prescribed by such circular are approved by OMB under 44 U.S.C. 3501, 
et seq. (1982) and assigned approval number 0348-0006. These sections 
describe the types of information that would satisfy the requirements 
of Circular A-102. The information will be utilized in leasing of Osage 
lands for oil and gas mining. Response is mandatory.
    William Haney, Field Solicitor, was the primary author of this 
document. For further information contact Gordon Jackson, 
Superintendent, Osage Agency, at (918) 287-1032.

List of Subjects in 25 CFR Part 226

    Indian-lands, Mineral resources, Mines, Oil and gas exploration.

Words of Issuance:

    For the reasons set out in the preamble, part 226 of chapter I, 
title 25 of the Code of Federal regulations is amended as set forth 
below.

PART 226--LEASING OF OSAGE RESERVATION LANDS FOR OIL AND GAS MINING

    1. The authority citation for 25 CFR Part 226 continues to read as 
follows:

    Authority: Sec. 3, 34 Stat. 543; secs. 1, 2, 45 Stat. 1478; sec. 
3, 52 Stat. 1034, 1035; sec. 2(a), 92 Stat. 1660.

    2. Section 226.11(a)(2) is revised to read as follows:

Sec. 226.11  Royalty payments.

    (a) * * * * *
    (2) Unless the Osage Tribal Council, with approval of the 
Secretary, shall elect to take the royalty in kind, payment is owing at 
the time of sale or removal of the oil, except where payments are made 
on division orders, and settlement shall be based on the actual selling 
price, but at not less than the highest posted price by a major 
purchaser (as defined in Sec. 226.1(h)) in Osage County, Oklahoma, who 
purchases production from Osage oil leases.
* * * * *
Ada E. Deer,
Assistant Secretary--Indian Affairs.
[FR Doc. 94-10120 Filed 4-26-94; 8:45 am]
BILLING CODE 4310-02-P