[Federal Register Volume 61, Number 62 (Friday, March 29, 1996)]
[Notices]
[Pages 14161-14162]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7645]



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[[Page 14162]]


DEPARTMENT OF THE INTERIOR
Minerals Management Service


Modification to the Bid Adequacy Procedures

AGENCY: Minerals Management Service, Interior.

ACTION: Notification of procedural changes.

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SUMMARY: The Minerals Management Service (MMS) has modified its 
existing bid adequacy procedures for ensuring receipt of fair market 
value on Outer Continental Shelf (OCS) oil and gas leases. This 
procedure eliminates in Phase 1 the number of bids rule, which 
effectively allowed for immediate acceptance of high bids on confirmed 
or wildcat tracts receiving three or more bids.

DATES: This modification is effective March 29, 1996.

FOR FURTHER INFORMATION CONTACT: Dr. Marshall Rose, Chief, Economic 
Evaluation Branch; Minerals Management Service; Mail Stop 4220, 381 
Elden Street, Herndon, Virginia 22070-4817; telephone: (703) 787-1536.

SUPPLEMENTARY INFORMATION: Previous changes in the February 1983 bid 
adequacy procedures were made in February, March, and July 1984, May 
1985, and May 24, 1991 (56 FR 23978). The following complete set of bid 
adequacy procedures incorporates those earlier changes and this most 
recent change.
    The MMS uses a two-phase process to determine bid adequacy. In 
Phase 1, we classify tracts into two groups: drainage and development 
or wildcat and confirmed. The MMS also identifies nonprospective 
tracts, i.e., those tracts judged not to be located on a viable 
prospect. All legal high bids \1\ on such nonprospective tracts are 
accepted. The MMS passes the high bids on all other tracts directly to 
Phase 2 for further evaluation. Phase 1 is conducted tract-by-tract and 
is generally completed within 2 weeks of the bid opening.

    \1\ ``Legal high bids'' mens those high bids which comply with 
MMS regulations and the Notice of Sale.
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    Phase 2 applies criteria designed to further determine bid adequacy 
on a tract-specific basis. Prospective wildcat and confirmed tracts 
that are not accepted in Phase 1 may receive further mapping and/or 
analysis in Phase 2. Subsequently, MMS reviews the viability 
determinations of these tracts. Those wildcat and confirmed tracts 
later determined to be nonviable can be eliminated from the set of 
tracts undergoing a full-scale MONTCAR evaluation and the high bids on 
them accepted. The remaining tracts, including all drainage and 
development tracts, receive further evaluation by comparing the high 
bids with the Mean Range of Values (MROV) and the Adjusted Delay Value 
(ADV). In addition, if in the judgment of the Regional Director a tract 
is or may be subject to drainage, the relevant costs due to delays 
associated with bid rejection are considered in computing the ADV.
    All drainage and development tracts which received three or more 
adjusted bids \2\ and prospective wildcat and confirmed tracts which 
received two or more adjusted bids will be compared with the Geometric 
Average Evaluation of Tract (GAEOT). For drainage and development 
tracts, the GAEOT will not be used when the high bid is equal to or 
less than one-sixth of the MROV.

    \2\ Anomalous bids are not included in the bid number in Phase 
2. Anomalous bids include all but the highest bid submitted for a 
tract by the same company, bidding alone or jointly, and the lowest 
bid on a tract when it is less than one-eight of the next lowest 
bid. The ``one-eighth rule'' can exclude no more than one bid for a 
given tract.
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    The MMS conducts most evaluations based upon data and analysis 
available at the time of the sale. However, we may gather additional 
data and perform further analyses after the sale at the discretion of 
the Regional Director to ensure a fair return to the Government.
    The MMS normally completes the bid adequacy recommendations for 
acceptance/rejection developed in Phase 2 sequentially over a period 
ranging between 14 and 90 days after the sale. Upon acceptance, the 
high bidders must pay the balance of the bonus bid (80 percent) along 
with the first year's annual rental within 15 days. The MMS returns the 
deposits, with interest, on all rejected high bids.

    Dated: March 22, 1996.
Thomas Gernhofer,
Associate Director for Offshore Minerals Management.
[FR Doc. 96-7645 Filed 3-28-96; 8:45 am]
BILLING CODE 4310-MR-M