[Federal Register Volume 61, Number 98 (Monday, May 20, 1996)]
[Proposed Rules]
[Pages 25160-25164]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-12545]



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DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Chapter II


Review of Existing Regulations

agency: Minerals Management Service (MMS), Interior.

action: Review of regulations; request for comment.

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summary: MMS performs annual periodic reviews of its significant 
regulations and asks the public to participate in these reviews. The 
purpose of the reviews is to identify and eliminate regulations that 
are obsolete, ineffective or burdensome. In addition, the reviews are 
meant to identify essential regulations that should be revised because 
they are either unclear, inefficient or interfere with normal market 
conditions.
    The purpose of this document is to: Provide the public an 
opportunity to comment on MMS regulations that should be eliminated or 
revised; and provide a status update of the actions MMS has taken on 
comments previously received from the public in response to documents 
published March 1, 1994 and March 28, 1995.

dates: Written comments must be received by July 19, 1996.

addresses: Mail written comments to Department of the Interior; 
Minerals Management Service, Mail Stop 4013; 1849 C Street NW., 
Washington, DC 20240; Attention: Bettine Montgomery, MMS Regulatory 
Coordinator, Policy and Management Improvement.

for further information contact: Bettine Montgomery, Policy and

[[Page 25161]]

Management Improvement, telephone (202) 208-3976; Fax (202) 208-3118.

supplementary information: MMS began a review of its regulations in 
early 1994 pursuant to the directives contained in the President's 
Executive Order 12866. The Executive Order calls for periodic 
regulatory reviews to ensure that all significant regulations are 
efficient and effective, impose the least possible burden upon the 
public, and are tailored no broader than necessary to meet the agency's 
objectives and Presidential priorities.
    MMS invited the public to participate in the regulatory review. The 
invitation was sent out via different media, namely a Federal Register 
document dated March 1, 1994 (59 FR 9718), MMS and independent 
publications, and public speeches by MMS officials during that time.
    MMS received approximately 40 public comments which were almost 
equally divided between its Royalty Management and Offshore Minerals 
Management Programs. MMS acknowledged the comments in a July 15, 1994 
document (59 FR 36108) and set forth its planned actions to address the 
comments, along with an estimated timetable for the actions.
    In the March 28, 1995, document (60 FR 15888), MMS: (a) asked for 
further public comments on its regulations, and (b) provided a status 
update of actions it had taken on the 40 public comments received the 
prior year. MMS received 10 responses from the March 28 document. We 
believe MMS has been very responsive to most of the comments received, 
to date.
    This document updates the MMS planned actions and related 
timetables on the major comments received to date. It also solicits 
additional comments from the public concerning regulations that should 
be either eliminated or revised. Since some of the public responses 
received in response to prior documents contained comments on very 
specific and detailed parts of the regulations, this document does not 
address every one received. For information on any comment submitted 
which is not addressed in this document, please contact Mrs. Montgomery 
at the number and location stated in the forward sections of this 
document.
    These annual reviews of regulations have resulted in the 
elimination of approximately 18 pages of regulations from the Code of 
Federal Regulations and the improvement, by rewriting, of over 200 
pages. We are fully committed to improving our regulations and working 
more closely with our customers and constituents. This is part of our 
effort to improve government by making it more efficient and 
responsive.
    MMS regulations are found at Title 30 in the Code of Federal 
Regulations. Parts 201 through 243 contain regulations applicable to 
MMS' Royalty Management Program (note: part 213 applies to Offshore 
royalty rate reductions); Parts 250 through 282 are applicable to MMS' 
Offshore Minerals Management; and Part 290 is applicable to 
Administrative Appeals.

Status Report

    The following is a status report by program area on the comments 
MMS has received, to date, on its regulations.

A. Offshore Minerals Management (OMM) Program

    OMM is currently reviewing the following eight sections of OMM 
regulations.
    1. Regulations applicable to production in deepwater (30 CFR Part 
250, Subpart H, Production).
    Comments Received--(a) ``Revise current regulations to provide for 
approval of extended flaring periods under certain situations (e.g., 
deepwater prospects, well tests, etc.) and clarify criteria for flaring 
or venting small amounts of gas'',
    (b) ``Revise requirements associated with subsea installations 
* * *'', etc.
    Action Taken or Planned--An MMS workgroup finalized its report on 
deepwater regulatory issues. The major recommendation from the report 
was that MMS should evaluate and regulate deepwater production 
activities through a ``total systems'' approach. Under this 
recommendation, MMS would require a lessee to submit a Deepwater 
Operations Plan for each deepwater or subsea development project. 
Individual projects could then be evaluated within the context of the 
master plan. The Associate Director for Offshore Minerals Management 
approved the report in May 1995, and we are finalizing guidelines and 
procedures for the preparation and approval of the Deepwater Operations 
Plan.
    Timetable--We are preparing a Letter to Lessees explaining the 
Deepwater Operations Plan and will issue it in June 1996.
    2. Regulations applicable to blowout preventer (BOP) testing and 
maintenance requirements (30 CFR 250.56 and 57).
    Comments Received--``Revise BOP testing regulations to allow for 
less frequent and shorter tests. Allow 14 day BOP test interval vs. 
current 7 day * * *.''
    Action Taken or Planned--MMS recently announced (March 1996) the 
selection of an engineering consulting firm to assess the performance 
of blowout preventer equipment and the frequency it should be tested. 
Selection of the firm was a joint effort of MMS and industry. MMS will 
use this cooperative study in determining if increased blowout 
preventer testing intervals will afford an equal or better degree of 
protection, safety, or performance. This study requires the systematic 
review and analysis of blowout preventer test results from wells 
drilled on the OCS.
    Timetable--The contractor will provide us with a report on the 
study in November 1966. MMS will use the study's results to revise our 
regulations as appropriate.
    3. Regulations governing safety and pollution prevention equipment 
(SPPE) (30 CFR Subpart H).
    Comments Received--(a) ``Reduce associated administrative burden on 
lessees and operators by eliminating unnecessary record keeping 
requirements (i.e., inventory lists, paperwork notifications, etc.).'' 
(b) ``Revise regulations governing Safety Valves to increase time 
between test and allowable leakage rates.''
    Action Taken or Planned--(a) MMS is drafting a proposed rule to 
revise the regulations governing SPPE. This proposed rule will address 
the concerns raised regarding recordkeeping. (b) MMS is reviewing 
Subpart H, Production Safety Systems, and plans to rewrite the subpart 
in plain English and update requirements where warranted. We expect to 
work with industry in areas where we need further data. The cooperative 
effort with the blowout preventer study can serve as a model.
    Timetable.--(a) MMS should publish this proposed rule in the 
Federal Register by September 1996. (b) MMS will begin rewriting 
subpart H by this summer. We will work with industry to initiate needed 
safety value studies early in 1997, following the joint blowout 
preventer study.
    4. Regulations governing conservation of resources and diligence 
(30 CFR 250. Subpart A, General and Subpart K, Oil and Gas Production 
Rates).
    Comment Received--(a) ``Revised Suspension of Production approval/
lease holding criteria * * *'', (b) ``Revise Determination of Well 
Producibility to make wireline testing and/or mud logging analysis 
optional * * *'', (c) ``revise current regulations to provide for 
approval of extending flaring periods * * *'', (d) ``Relax restrictions 
on commingling reservoirs in a common wellbore * * *'', (e) ``Allow 
flexibility in the methods of

[[Page 25162]]

testing subsea wells. * * *'', (f) ``MMS [should] determine and specify 
allowable volumes of liquid hydrocarbons that lessees could burn 
without requesting approval.''
    Action Taken or Planned--For (a) above, MMS published a proposed 
rule on April 25, 1996, to extend the period for holding a lease beyond 
its primary term from 90 to 180 days. For (b) above, MMS is currently 
rewriting Subpart A in plain English. This effort will also include any 
changes needed to the regulations. We will obtain more ideas from 
industry concerning what changes are needed. For (c) above, MMS will 
not relax current regulations at this time. We are reviewing the 
results of air quality studies and will not make any changes to the 
regulations until this review is complete. For (d) above, MMS issued a 
Letter to Lessees that allowed for greater flexibility in dealing with 
commingling issues. For (e) above, MMS will not change the regulations. 
Current regulations allow operators to request that different testing 
methods be allowed when conventional testing is impractical. For (f) 
above, MMS, is addressing the burning of liquid hydrocarbons in a rule 
that we published as proposed on February 17, 1995. MMS agrees with the 
benefits of using a specific value for the term ``minimal.'' However, 
in approving a request to burn liquid hydocarbons, we need to deal with 
many economic, technical, safety, and environmental factors. 
Conservation is a key factor in determining how much liquid 
hydrocarbons a lessee can burn. Making volume determinations on a case 
by case basis allows us to properly consider technical, safety, and 
environmental factors.
    Timetable.--A final rule addressing (f) above, (burning small 
quantities of liquid hydrocarbons) is scheduled for publication in May 
1996. Proposed rules covering the other matters mentioned above will be 
published during 1996 and early 1997.
    5. Regulations regarding construction and removal of platforms and 
structures (30 CFR 250. Subpart I, Platforms and Structures).
    Comments Received--(a) ``Modify platform design wave return period 
calculation by placing a cap of 100 years on the field life calculation 
* * *'', (b) ``Adopt API RP2A (20th edition) Section 14, Surveys, in 
its entirety * * *'', (c) ``Revise site clearance requirements * * *'', 
(d) ``Revise requirements for placing protective domes over well studs 
* * *'', etc.
    Action Taken or Planned--For (a) above, MMS is reviewing this 
request and considering some options. For (b) above, MMS will not 
modify the regulations. Current rules allow operators to petition for 
longer inspection intervals. On April 15-17, 1996, MMS held a workshop 
in New Orleans and discussed lease abandonment and platform removal 
issues with interested parties from other government agencies and 
private industry. We will continue to work with these parties to 
identify needed research and potential changes to the regulations.
    Timetable--In the coming months, MMS will identify specific action 
items and timetables for both further regulatory changes and research.
    6. Regulations applicable to directional surveys, (30 CFR 250.51).
    Comments Received--``Revise directional survey requirements to 
allow composite measurement-while-drilling directional survey to be 
acceptable * * *.''
    Action Taken or Planned--MMS is planning to rewrite the regulations 
governing Oil and Gas Drilling Operations, found in Subpart D, in plain 
English. We plan to update the regulations to keep pace with current 
technology as part of the plain English initiative.
    Timetable--MMS plans to begin drafting a proposed rule shortly, 
Publication in the Federal Register would be sometime in 1997.
    7. Regulations applicable to daily pollution inspection 
requirements (30 CFR 250.41).
    Comments Received--``Revise current requirements for daily 
pollution inspection of unmanned production facilities * * *.''
    Action Taken or Planned--On February 15, 1996, MMS issued a Notice 
to Lessees regarding the pollution inspection frequency for unmanned 
facilities. The current regulations allow operators to request a waiver 
from the daily inspection of unmanned facilities. The Notice to Lessees 
reviewed the criteria MMS uses in determining whether or not to grant 
the waiver.
    Timetable--MMS has no plans to change the regulations in this area.
    8. Regulations applicable to production safety system training (30 
CFR 250.214).
    Comments Received--(a) ``Revise training regulations to reduce the 
associated burden on operators by modifying requirements (e.g., 
frequency, refresher requirements, structure, etc.) and allow expanded 
training delivery modes.'' (b) ``* * * training regulations (well-
control) are not clearly stated and often not relevant * * *.''
    Action Taken or Planned--MMS rewrote the entire section (subpart O) 
of training regulations in a plain English format and published a 
proposed rule in the Federal Register on November 2, 1995 (60 FR 
55683), MMS received comments and is preparing the final rule.
    Timetable--MMS should publish the final rule by the end of 1996.
    9. Regulations applicable to Pipelines and Pipeline Rights-of-Way 
(Subpart J).
    Comments Received--Revise regulations to avoid duplication of 
requirements between DOI and the Department of Transportation (DOT).
    Action Taken or Planned--MMS continues to work with DOT and with 
other interested parties to develop a new memorandum of understanding 
(MOU) between DOI and DOT. After we have a new MOU, MMS will revise 
regulations to clarify rules and remove redundant requirements, and 
promote compatible regulations.
    Timetable--We expect that DOI and DOT will approve a new MOU by 
fall of 1996.

B. Royalty Management Program (RMP)

    RMP is reviewing regulations in the following subject areas.
1. Statute of Limitations and Record Retention
    Comments Received--``Statute of limitations is unclear.''

--``Establish a reciprocal 5-year statute of limitations from the date 
an obligation becomes due.''
--``Absence of a record retention program creates some confusion. 
Regulations should require record retention to coincide with the 5-year 
statute of limitations.''

    Action Taken or Planned--The extent of the time periods covered by 
audits of royalty payments has been a matter of considerable 
controversy between MMS and the minerals industry for several years. 
MMS's goal, more recently, as reflected in the Contemporaneous Audit 
Initiative, has been to conduct all audits on a contemporaneous basis 
consistent with the most effective and efficient use of audit 
resources, to provide industry with earlier closure, to streamline the 
royalty collection process, and to be more responsive to the public we 
serve.
    Timetable--Accordingly, MMS issued a policy memorandum on July 14, 
1995, that affirms MMS's policy to complete reviews and audits of 
royalty payments made on Federal and Indian leased land, including 
issuance of enforcement documents for underpayments (orders to pay or 
to recompute and pay). Within the 30 U.S.C. 1713 principal documents 
retention period, that is within six years of the royalty payment due 
date. Some exceptions to this requirement may occur in RMP compliance 
activities.

[[Page 25163]]

2. Interests on Overpayments
    Comment received--``Interest accrual should be equitable between 
the Agency and industry.''
    Action Taken or Planned--MMS does not have statutory authority to 
remit interest to companies for overpayments. We are pursuing 
strategies to improve electronic royalty reporting and paying options 
to our customers. This along with the option for companies to post 
surety in lieu of paying disputed amounts should decrease lost interest 
on overpayments to MMS.
    Timetable--Ongoing.
3. Gas Valuation
    Comments received--``Define gross proceeds more equitably and 
clearly in this ever changing gas marketing environment.''

--``It is important that the Federal Gas Valuation Rule final rule not 
discriminate against producers which are affiliated with marketing 
companies and are party to non-arms-length contracts.''
--``Extend the elimination of processing and transportation allowance 
forms to oil.''
--``* * * commends the MMS on their use of negotiated rulemaking 
process to address the valuation of gas. Rule should result in 
administrative cost savings for all parties.''
--``If the Takes vs. Entitlements policy stays in effect, MMS should 
strictly enforce reporting on actual quantities taken for all industry 
participants.''

    Action Taken or Planned--Revisions of the Valuation Regulations 
Governing Allowances were published in the Federal Register as a final 
rule on February 12, 1996. This rule eliminated most allowance forms 
filing requirements for oil, gas, and coal produced from Federal 
leases.
    The Federal Gas Valuation proposed rule was published in the 
Federal Register on November 6, 1995, and the comment period closed on 
February 5, 1996. The proposed rule represented the consensus of the 
Federal Gas Valuation Negotiated Rulemaking Committee with 
representation from MMS, industry and the states.
    MMS is preparing a Federal Register document to announce the 
reconvening of the committee in June 1966 and another Federal Register 
document to reopen the public comment period. The proposed rule would 
provide alternatives to using gross proceeds as a basis for gas 
valuation, such as published natural gas index prices.
    The Indian Gas Valuation Negotiated Rulemaking Committee is 
developing a proposed rule governing the valuation for royalty purposes 
of natural gas produced from Indian leases. The proposed rule would add 
a methodology to calculate the major portion value and an alternative 
methodology for dual accounting as required by Indian lease terms. The 
proposed rulemaking would simplify and add certainty to the valuation 
of production from Indian leases.
    MMS is developing a proposed rule clarifying what deductions may be 
taken from gross proceeds for the costs of transportation under Federal 
Energy Regulatory Commission (FERC) Order No. 636.
    Timetable--MMS will reconvene the Federal Gas Valuation Negotiated 
Rulemaking Committee in June 1996, and has reopened the comment period 
to discuss options for proceeding further with a rulemaking. MMS 
anticipates publishing a proposed rulemaking for Indian gas valuation 
in July 1996. MMS also expects to publish a proposed rule on FERC Order 
No. 636 early this summer.
4. Reporting Procedures and Threshold
    Comments Received--``Eliminate or streamline MMS Form 2014 
reporting.''

--``Report prior period adjustments on a `net' basis.''
--``Change estimated payment from lease level to payor level.''
--``Assess interest at the payor level--for the Indian leases on the 
basis of each Indian Tribe.''
--``Eliminate Payor Information (PIF) Filings. This is an unnecessary 
and costly reporting requirement.''
--``MMS should modify the regulations and system tolerances/thresholds 
so that only those exceptions that are cost beneficial for MMS to 
pursue are generated.''
--``Set thresholds or tolerances for regulations to save costs to both 
MMS and industry. (Example: Invoices are sent for less than $1.00.)''
--``MMS should not implement regulations until its systems are 
programmed to handle the new regulations.''

    Action Taken or Planned--MMS has revised its billing thresholds and 
assessments policy to reduce administrative costs, and we continue to 
review these issues through the Royalty Policy Committee which was 
formed in September 1995. The Committee's membership includes 
representatives from states, tribes, allottee associations, industry 
trade groups and other agencies. At their initial meeting, a Royalty 
Reporting and Production Accounting Subcommittee was established.
    The Subcommittee had its first meeting in November 1995 and agreed 
to review all royalty and production reporting forms and policies. To 
assure all areas were addressed, four workgroups were formed to review 
the Payor Information Form, royalty reporting, oil and gas production 
reporting, and solids production reporting.
    The preliminary recommendations from the workgroups cover 
streamlining of all reporting forms; reducing or eliminating redundant 
data collection; changing estimates; and reviewing thresholds for 
allowance and interest billings.
    Timetable--The Subcommittee recommendations are to be finalized and 
forwarded to the full committee for their review and approval in June 
1996. The recommendations will then be reviewed for possible 
implementation by MMS. In particular, recommendations that can be 
implemented in the short term without significant cost will be pursued 
by MMS.
5. Refunds Due to Industry Which Are Controlled by Section 10 of the 
Outer Continental Shelf Lands Act
    Comments Received--``Section 10 refund requirements should be 
eliminated. The refund process used for onshore properties should be 
established for offshore properties.''

--``Eliminate documentation requirements for refund requests over $250 
M, and/or increase this threshold to $500 M; raise the refund request 
limit to $5 M. Exempt pure accounting adjustments for items such as 
production date adjustments and incorrect AID numbers; exempt unit 
revisions because these revisions are often made more than two years 
after the date of production; establish a time limit on MMS for review 
of a refund request to expedite the process; and overpayments on OCS 
properties should be allowed to be offset against any OCS 
underpayment.''

    Action Taken or Planned--A legislative change would be required to 
eliminate the Section 10 refund requirements of 43 U.S.C. 1339.
    Section 10(b) of 43 U.S.C. 1339(b) requires MMS to report refunds 
or credits to both Houses of Congress and can increase the time to 
process refunds and recoupments. The final rule published on July 28, 
1994 (59 FR 38359), Titled ``Offsets Recoupments and Refunds of Excess 
Payments of Royalties, Rentals; Bonuses, or other amounts under Federal 
Offshore

[[Page 25164]]

Minerals Leases'' established procedures for obtaining refunds and 
credits of excess payments and clarified what payments are not subject 
to Section 10's requirements. Unit agreement revisions are covered in 
this rule under ``Transactions not subject to section 10''.
    This rule also provides for a de minimis exception to the MMS 
approval process. On February 23, 1996 (61 FR 7016), MMS published a 
document raising the de minimis reporting requirements from $250 to 
$2,500. By raising the de minimis level, companies may now recover 
overpayments below the de minimis amount from future royalty payments. 
This change will reduce administrative costs for MMS and companies.
6. The Appeals Process
    Comments Received--``Current appeals process is too long.''
    Action Taken or Planned--MMS has made several administrative 
processing changes to streamline the appeal process. One change was 
transferring decisionmaking on routine appeals from the Appeals 
Division to the Royalty Management Program. This has reduced the 
Appeals Division's workload by 20 percent and freed up staff to work on 
more complex cases.
    Other efforts included the initiation of several pilot programs to 
look at additional streamlining possibilities. One pilot program was 
aimed at decreasing the time and expense incurred by MMS in its 
preparation of an appellant's administrative record. A second pilot 
program involved reformatting the decisionmaking process to speed the 
issuance of shorter, more timely decisions. The third pilot program 
will test the use of alternative dispute resolution mechanisms to 
resolve many of the administrative appeals.
    Spinoff projects from these pilot efforts are still ongoing and 
will result in further changes to the appeals process in the future. We 
are engaged in a concentrated effort, during the spring and summer of 
1996, to resolve all of the older, active appeals on the docket. Also, 
the Royalty Policy Committee has established an Appeals/Settlement/ADR 
subcommittee which should provide MMS with additional advice on ways to 
improve the process of resolving disputes involving royalty 
collections.
    Timetable--The first two pilots were put in place the latter half 
of 1994, and the third pilot began the end of February 1995.
    Further administrative streamlining changes and possibly regulatory 
changes by MMS are anticipated for calendar year 1996.
7. Other MMS Regulatory Actions
--MMS is evaluating comments received on the proposed rule to establish 
liability for royalty due on Federal and Indian leases, and to 
establish responsibility to pay and report royalty and other payments.
--MMS published an advance notice of proposed rulemaking on valuation 
of oil from Federal and Indian leases and is evaluating the comments 
received from industry, States, and Indian tribes on this notice.

    Dated: May 13, 1996.
Cynthia Quarterman,
Director, Minerals Management Service.
[FR Doc. 96-12545 Filed 5-17-96; 8:45 am]
BILLING CODE 4310-MR-M