[Federal Register Volume 61, Number 109 (Wednesday, June 5, 1996)]
[Proposed Rules]
[Pages 28528-28530]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-13989]
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DEPARTMENT OF THE INTERIOR
30 CFR Part 256
RIN 1010-AC15
Drilling Requirements for Outer Continental Shelf Leases
AGENCY: Minerals Management Service, Interior.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Minerals Management Service (MMS) proposes to amend its
lease term regulations to remove the requirement that all lessees begin
an exploratory well within the first 5 years of the primary term for
new 8-year leases on the Outer Continental Shelf (OCS). MMS is
proposing this change because recently enacted legislation provides
more effective incentives to expedite lease development. A drilling
requirement would apply when MMS stipulates a drilling requirement in
the notice of sale.
DATES: MMS will consider all comments received by August 5, 1996. We
will begin reviewing comments at that time and may not fully consider
comments we receive after August 5, 1996.
ADDRESSES: Mail or hand-carry written comments to the Department of the
Interior; Minerals Management Service; 381 Elden Street; Mail Stop
4700; Herndon, Virginia 22070-4817; Attention: Chief, Engineering and
Standards Branch.
FOR FURTHER INFORMATION CONTACT:
Judith M. Wilson, Engineering and Standards Branch, telephone (703)
787-1600.
SUPPLEMENTARY INFORMATION: Section 8(b) of the Outer Continental Shelf
Lands Act (OCSLA), 43 U.S.C. 1331 et seq., as amended, 92 Stat. 629,
states that an oil and gas lease is issued ``for an initial period of
five years; or not to exceed ten years where the Secretary finds that
such longer period is necessary to encourage exploration and
development in areas because of unusually deep water * * *.''
Currently, MMS offers 10-year terms for leases in water depths of 900
meters or more. In water depths of 400 to 900 meters, MMS offers 8-year
lease terms
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subject to a requirement that the lessee begin an exploratory well
within the first 5 years, 30 CFR 256.37.
The OCSLA requires a lessee to be diligent in exploring and
developing a lease. If production begins within the primary term, then
the lease continues for as long as production continues, 30 CFR
256.37(b). However, 5 years may not be adequate time in which to begin
exploratory drilling even for a diligent lessee. Because of unusual
circumstances such as deep water, the lessee risks losing a lease
through no fault of its own.
Due to the number of changes facing the oil and gas leasing
program--such as lower oil prices, technological advances, subsalt
discoveries and expansion to deeper waters--MMS initiated a review of
OCS leasing policy several years ago. MMS found that the requirement
that 8-year leases be drilled by the end of the fifth year did not
result in meaningful increases in drilling. Most of the offered tracts
were relinquished at the end of the fifth year. In particular, between
1985 and 1992, 421 tracts were leased for 8-year terms. Only 29 of the
421 leases had been drilled. Of those 29 leases, only 18 were still
active by the end of 1993.
With the enactment of the OCS Deep Water Royalty Relief Act
(DWRRA), P.L. 104-58, new deepwater leases are offered for sale with
available royalty volume suspensions. Royalty volume suspensions are
available for new fields in at least 200 meters of water and lying west
of 87 degrees, 30 minutes West longitude. Royalty payments on volumes
of production are suspended for at least the first 17.5 million barrels
of oil equivalent (mmboe) in 200 to 400 meters of water; 52.5 mmboe in
400 to 800 meters; and 87.5 mmboe in more than 800 meters of water. MMS
views this significant financial incentive as more effective than the
drilling requirement as a means of achieving earlier drilling. In
addition, the rental rates for all leases lying in waters deeper than
200 meters may be increased (e.g., they were increased from $5.00 to
$7.50/acre in Sale 157) to encourage earlier drilling.
Therefore, MMS proposes to amend its regulation at 30 CFR 256.37 to
remove the requirement that the lessee must begin drilling within 5
years on 8-year leases issued on or after the date this rule becomes
final. The amendment would also change the 400 to 900 meter depth
requirement for 8-year leases to 400 to 800 meters to be consistent
with the DWRRA.
Author: This document was prepared by Judy Wilson, Engineering
and Standards Branch, and Mary Vavrina, Offshore Resource Evaluation
Division, MMS.
Executive Order (E.O.) 12866
This rule is not a significant rule requiring Office of Management
and Budget review under E.O. 12866.
Regulatory Flexibility Act
The Department of the Interior (DOI) has determined that this
proposed rule will not have a significant effect on a substantial
number of small entities. Most entities that engage in offshore
activities as operators are not small because of the technical and
financial resources and experience necessary to conduct offshore
activities. Small entities are more likely to operate onshore or in
State waters--areas not covered by the proposed regulation. When small
entities work in the OCS, they are more likely to be contractors rather
than operators. For example, a company that collects geologic and
geophysical data might be a small entity. While these contractors must
follow rules governing OCS operations, we are not changing the rules
that govern the actual operations of a lease. We are only proposing to
modify the rules that govern the length of time required for drilling
an exploratory well. The rule could have a positive secondary effect.
By extending the time available to begin drilling an exploratory well
in unusual circumstances, more leases may be active and this could
result in an increase in opportunities for small entities to perform
services. The added time could also work to benefit small companies who
have slower computers and could benefit from a longer period of time to
review data.
Paperwork Reduction Act
The proposed rule does not contain new information collection
requirements that require approval by the Office of Management and
Budget (OMB). The information collection requirements in 30 CFR part
256 are approved by OMB under approval No. 1010-0006.
Takings Implication Assessment
The DOI certifies that this rule does not represent a governmental
action capable of interference with constitutionally protected property
rights. A Takings Implication Assessment prepared pursuant to E.O.
12630, Government Action and Interference with Constitutionally
Protected Property Rights, is not required.
Unfunded Mandate Reform Act of 1995
This rule does not contain any unfunded mandates to State, local,
or tribal governments or the private sector.
E.O. 12988
The DOI has certified to OMB that this proposed rule meets the
applicable civil justice reform standards provided in Sections 3(b)(2)
of E.O. 12988.
National Environmental Policy Act
MMS has examined the proposed rulemaking and has determined that
this rule does not constitute a major Federal action significantly
affecting the quality of the human environment pursuant to Section
102(2)(c) of the National Environmental Policy Act of 1969 (42 U.S.C.
4332(2)(c)).
List of Subjects in 30 CFR Part 256
Administrative practice and procedures, Continental shelf,
Environmental Protection, Government contracts, Mineral royalties, Oil
and gas exploration, Pipelines, Public lands--mineral resources, Public
lands--rights-of-way, Reporting and recordkeeping requirements, Surety
bonds.
Bob Armstrong,
Assistant Secretary, Land and Minerals Management.
For the reasons set forth in the preamble, the Minerals Management
Service proposes to amend 30 CFR parts 256 as follows:
PART 256-LEASING OF SULPHUR OR OIL OR GAS IN THE OUTER CONTINENTAL
SHELF
1. The authority citation for part 256 continues to read as
follows:
Authority: 43 U.S.C. 1331 et seq.
2. In Sec. 256.37, paragraph (a)(2) is revised to read as follows:
Sec. 256.37 Lease term.
(a)(1) * * *
(2) If your oil and gas lease is in water depths of 400 meters or
more, it will have an initial lease term of at least 8 years but not
more than 10 years. The initial term for each lease will be stated in
the Final Notice of Sale.
(i) For leases issued before [the effective date of the final
rule], you must commence an exploratory well within the first 5 years
of the initial 8-year term or MMS will cancel the lease.
(ii) For leases issued on or after [the effective date of the final
rule], MMS will incorporate into the lease terms by
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lease stipulation any drilling requirements.
* * * * *
[FR Doc. 96-13989 Filed 6-4-96; 8:45 am]
BILLING CODE 4310-MR-M