[Federal Register Volume 59, Number 122 (Monday, June 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-15462]


[[Page Unknown]]

[Federal Register: June 27, 1994]


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DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 206

 

Establishment of the Federal Gas Valuation Negotiated Rulemaking 
Committee

AGENCY: Minerals Management Service, Interior.

ACTION: Establishment of advisory committee.

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SUMMARY: As required by Section 9(a)(2) of the Federal Advisory 
Committee Act (FACA), 5 U.S.C. App., the Department of the Interior 
(Department) is giving notice of the establishment of the Federal Gas 
Valuation Negotiated Rulemaking Committee (Committee) to develop 
specific recommendations with respect to Federal gas valuation pursuant 
to its responsibilities imposed by the Federal Oil and Gas Royalty 
Management Act of 1982, 30 U.S.C. 1701 et seq. (FOGRMA). The Department 
has determined that the establishment of this Committee is in the 
public interest and will assist the Agency in performing its duties 
under FOGRMA. Copies of the Committee's charter will be filed with the 
appropriate committees of Congress and the Library of Congress in 
accordance with section 9(c) of FACA.

FOR FURTHER INFORMATION CONTACT:
Ms. Deborah Gibbs Tschudy, Chief, Valuation and Standards Division, 
Minerals Management Service, Royalty Management Program, P.O. Box 
25165, MS-3920, Denver, Colorado, 80225-0165, telephone number (303) 
275-7200, fax number (303) 275-7227.

SUPPLEMENTARY INFORMATION: Through an informal study group, MMS has 
conducted discussions to receive input on the current gas market and 
identify the challenges facing royalty valuation of gas produced from 
Federal leases for royalty purposes. The discussions have gone well and 
needs for regulatory changes have been identified. The MMS now believes 
that using a negotiated rulemaking committee to make specific 
recommendations with respect to Federal gas valuation would help the 
agency in developing a rulemaking. The Department is, therefore, 
establishing the Federal Gas Valuation Negotiated Rulemaking Committee.

Background

    Since the publication of the March 1, 1988, gas valuation 
regulations (30 CFR Part 206) many of MMS's constituents have expressed 
concern about the current ``tracing method'' of valuing production from 
unit and communization agreements. Of particular concern is determining 
the proper value, for royalty purposes, when the working interest owner 
sells none of the production allocated to him under the agreement. 
Likewise, constituents have pointed out difficulties with the current 
benchmark system utilized to value non-arm's-length and no-sales 
situations. Those difficulties include issues of comparability, 
certainty, and access to information. As part of Vice President Gore's 
National Performance Review (NPR), the Royalty Management Program 
recently initiated a Reinvention Laboratory Team to examine ways to 
streamline the royalty management process. One of the recommendations 
of that team was to improve the valuation benchmark system. The NPR 
Team recommended to the Royalty Management Advisory Committee (RMAC) 
that a pilot be conducted to evaluate the use of spot prices as the 
second benchmark.
    In commenting on the recommendations of the NPR Team, RMAC 
recommended that the entire benchmark system be evaluated and that the 
evaluation be limited to gas produced from Federal leases.

Statutory Provisions

    Pursuant to FOGRMA (30 U.S.C. 1701 et seq.), 30 CFR Part 206 (1993) 
and Federal oil and gas lease and agreement terms, certain principles 
of royalty accounting will form the basis for a proposed rule:
    Volume: Royalties must be paid each month on the volume of 
production allocated to or produced from the Federal lease under the 
agreement terms.
    Royalty Rate: Royalties must be paid in accordance with the royalty 
rate specified in each lease unless specified otherwise under the terms 
of the agreement.
    Value of Production: Value should be determined at the time of 
production. Value should be based on the fair market value at the 
lease.
    Payment Responsibility: Federal lessees or their working interest 
owners are ultimately responsible for paying royalties, but other 
entities can be assigned the royalty payment responsibility.

The Committee and Its Process

    During the winter and spring of 1994, MMS met with representatives 
of the oil and gas industry and States to receive input about the 
current gas market and identify regulatory changes needed to add 
certainty and simplicity to valuation, for royalty purposes, of gas 
produced from Federal leases in a new gas market. An informal study 
group format was used to obtain and clarify varying viewpoints. The 
materials received to date during the input sessions are available for 
inspection and copying at the address referenced above for Ms. Deborah 
Gibbs Tschudy.
    Members of the study group include representatives of the American 
Petroleum Institute (API), the Council of Petroleum Accountants 
Societies (COPAS), the Rocky Mountain Oil and Gas Association (RMOGA), 
the Independent Petroleum Association of America (IPAA), the 
Independent Petroleum Association of Mountain States (IPAMS), the 
Natural Gas Supply Association (NGSA), an independent marketer, and 
representatives of the States of Utah, North Dakota, Montana, and New 
Mexico. The MMS and the study group participants believe that the input 
sessions have been mutually beneficial. As a result, MMS now believes 
it would be appropriate for the study group to transform itself and 
make specific regulatory recommendations for implementing a rulemaking 
regarding Federal gas valuation. The Department is therefore 
establishing the Federal Gas Valuation Negotiated Rulemaking Committee.
    The recently enacted Negotiated Rulemaking Act of 1990 (Pub. L. 
101-648) contemplates a ``convening'' process which involves 
identifying the potential parties and issues, publishing a notice of 
intent to form a committee, waiting 30 days for comments to be 
submitted responding to the notice, and only then proceeding with the 
establishment of the committee provided it meets the criteria of the 
Act. In this case, the study group process has served the same function 
as the convening--parties that would be significantly affected and the 
issues in controversy have been identified. The study group's 
discussions have also enabled the MMS to determine that the criteria 
for negotiated rules, as spelled out in the Negotiated Rulemaking Act, 
are met for this rule:
     The rule is needed, since royalty payors are not able to 
comply with the current regulations particularly in the current gas 
market.
     A limited number of identifiable interests will be 
significantly affected by the rule. Those parties are oil and gas 
companies who produce gas and pay royalties on Federal leases and 
States who receive royalties from gas produced from Federal leases 
located in their State.
     Representatives can be selected to adequately represent 
these interests, as reflected above.
     The interests are willing to negotiate in good faith to 
attempt to reach a consensus on a proposed rule.
     There is a reasonable likelihood that the Committee will 
reach consensus on a proposed rule within a reasonable time. This 
determination has been made based on discussions of the study group, 
and hence is built on the developments to date.
     The use of the negotiation will not delay the development 
of the rule if time limits are placed on the negotiation. Indeed, its 
use will expedite both development and ultimate acceptance of the rule.
    The Department is not proposing to issue a separate notice of 
intent to form a negotiated rulemaking committee for this rule. Given 
the evolution of this committee, the publication of such a notice would 
only show down the rulemaking process and the functions of the notice 
of intent have either already been met or are provided for in this 
notice. Moreover, the Negotiated Rulemaking Act specifically provides 
that its provisions are not mandatory.
    The Negotiated Rulemaking Act does anticipate an outreach to ensure 
that people who were not contacted during the convening process can 
come forward to explain why they believe they would be significantly 
affected and yet are not represented on the Committee or to argue why 
they believe the rule should not be negotiated. The MMS believes that 
the interests who would be significantly affected by this rule are 
represented by the informal study group already in place which includes 
representatives from API, COPAS, RMOGA, IPAA, IPAMS, NGSA, an 
independent marketer, and the states of Utah, Montana, North Dakota, 
and New Mexico. If anyone believes that their interests are not 
adequately represented by these organizations, they must demonstrate 
and document that assertion through an application submitted no later 
than 10 calendar days following publication of this notice. You may fax 
your documentation to (303) 275-7227.

Certification

    I hereby certify that the Federal Gas Valuation Negotiated 
Rulemaking Committee is in the public interest in connection with the 
performance of duties imposed on the Department of the Interior by 30 
U.S.C. 1701 et seq.

    Dated: June 2, 1994.
Bruce Babbit,
Secretary of the Interior.
[FR Doc. 94-15462 Filed 6-24-94; 8:45 am]
BILLING CODE 4310-MR-M