[Federal Register Volume 61, Number 109 (Wednesday, June 5, 1996)]
[Proposed Rules]
[Pages 28525-28528]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-13990]



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DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 250

RIN 1010-AC19


Unitization

AGENCY: Minerals Management Service (MMS), Interior.

ACTION: Notice of proposed rulemaking.

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SUMMARY: MMS proposes to amend its unitization regulations by removing 
the model unit agreements for exploration, development, and production 
units and development and production units. The model agreements would 
be available from the Regional Supervisor. The rule would also be 
written in ``plain English.'' We take this action to support the 
President's initiative to reform Government regulations. Our interest 
is to shorten the regulation and clarify the wording.

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: The rules on unitization in 30 CFR part 250, 
implementing Section 5(a)7 of the Outer Continental Shelf (OCS) Lands 
Act Amendments of 1978, were published on May 2, 1980. The rules were 
amended on February 16, 1982. The amended rulemaking removed the 
provisions that required segregation of the portion of the OCS oil and 
gas lease not included in the unit agreement. That amendment was based 
on the Department of the Interior (DOI) Solicitor's Opinion M-36927. 
The rules were amended again in April 1988, when MMS restructured and 
consolidated into one document the rules governing oil, gas, and 
sulphur exploration, development, and production operations on the OCS. 
The model unit agreements were incorporated at this time. The last 
revision was in July 1991, to include sulphur operations in 
unitization.
    This subpart, 30 CFR part 250, Subpart M, Unitization, is intended 
to

[[Page 28526]]

prevent waste, conserve natural resources (protection of marine life 
was incorporated into conservation in 1971), and/or protect correlative 
rights. The rules include provisions to:
     explain the authority and requirements for unitization;
     provide for compulsory or voluntary unitization;
     explain requirements for competitive reservoir operations;
     explain how a lessee may request a determination of 
whether a reservoir is competitive;
     explain how to submit a joint development and production 
plan;
     explain the process for voluntary unitization;
     explain the process for compulsory unitization; and
     explain the role of a model agreement.
    This proposed rule does not intend any substantive changes to this 
regulation. It would shorten existing regulations by removing the model 
unit agreements. The ``plain English'' would clarify the rule.
    There are two model unit agreements, one for exploration, 
development, and production units, the other for development and 
production units. The model agreements would continue to be available 
from the Regional Supervisor. The Regional Supervisor could approve 
variations from the model agreements for good cause.
    Author: This document was prepared by Judy Wilson, Engineering and 
Standards Branch, Offshore Resource Evaluation Division, MMS.

Executive Order (E.O.) 12866

    This rule does not meet the criteria for a significant rule 
requiring review by the Office of Management and Budget under E.O. 
12866.

Regulatory Flexibility Act

    Since this proposed amendment has no economic effects, DOI has 
determined that this proposed rule will not have a significant effect 
on a substantial number of small entities.

Paperwork Reduction Act

    This proposed rule contains a collection of information which has 
been submitted to the Office of Management and Budget (OMB) for review 
and approval under section 3507(d) of the Paperwork Reduction Act of 
1995. As part of our continuing effort to reduce paperwork and 
respondent burden, MMS invites the public and other Federal agencies to 
comment on any aspect of the reporting burden. Submit your comments to 
the Office of Information and Regulatory Affairs, OMB, Attention Desk 
Officer for the Department of the Interior (OMB control number 1010-
0068), Washington, DC 20503. Send a copy of your comments to the Chief, 
Engineering and Standards Branch; Mail Stop 4700; Minerals Management 
Service; 381 Elden Street; Herndon, Virginia 22070-4817. You may obtain 
a copy of the proposed collection of information by contacting the 
Bureau's Information Collection Clearance Officer at (703) 787-1242.
    The title of this collection of information is ``30 CFR 250, 
Subpart M, Unitization.'' OMB previously approved it under OMB control 
number 1010-0068.
    The collection of information consists of a proposed unit 
agreement; a proposed initial plan of operation; supporting geological, 
geophysical, and engineering data; and any other information necessary 
to show that the unitization proposal meets the criteria in 
Sec. 250.190. If approved, respondents will submit to MMS a unit 
agreement, unit operation agreement, and the initial plan of operation 
as the Regional Supervisor may require.
    MMS uses the information to ensure that operations under the 
proposed unit agreement will prevent waste, conserve natural resources, 
and protect correlative rights including the Government's interests.
    Respondnets are Federal OCS oil, gas, and sulphur lessees. MMS 
receives approximately 53 responses each year. The frequency of 
submission varies.
    MMS estimates the annual reporting burden to be approximately 2,424 
hours, an average of 45.7 hours per response. Based on $35 per hour, 
the burden hour cost to respondents is estimated to be $84,840. The 
estimate of other annual costs to respondents is unknown.
    MMS will summarize written responses to this notice and address 
them in the final rule. All comments will become a matter of public 
record.
    1. MMS specifically solicits comments on the following questions:
    (a) Is the proposed collection of information necessary for the 
proper performance of MMS's functions, and will it be useful?
    (b) Are the estimates of the burden hours of the proposed 
collection reasonable?
    (c) Do you have any suggestions that would enhance the quality, 
clarity, or usefulness of the information to be collected?
    (d) Is there a way to minimize the information collection burden on 
those who are to respond, including through the use of appropriate 
automated electronic, mechanical, or other forms of information 
technology?
    2. In addition, the Paperwork Reduction Act of 1995 requires 
agencies to estimate the total annual cost burden to respondents or 
recordkeepers resulting from the collection of information. MMS needs 
your comments on this item. Your response should split the cost 
estimate into two components:
    (a) Total capital and startup cost component and
    (b) Annual operation, maintenance, and purchase of services 
component.
    Your estimates should consider the costs to generate, maintain, and 
disclose or provide the information. You should describe the methods 
you use to estimate major cost factors, including system and technology 
acquisition, expected useful life of capital equipment, discount 
rate(s), and the period over which you incur costs. Capital and startup 
costs include, among other items, computers and software you purchase 
to prepare for collecting information; monitoring, sampling, drilling, 
and testing equipment; and record storage facilities. Generally, your 
estimates should not include equipment or services purchased: before 
October 1, 1995; to comply with requirements not associated with the 
information collection; for reasons other than to provide information 
or keep records for the Government; or as part of customary and usual 
business or private practice.
    The Paperwork Reduction Act of 1995 provides that an agency may not 
conduct or sponsor, and a person is not required to respond to, a 
collection of information unless it displays a currently valid OMB 
control number.

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

    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.

[[Page 28527]]

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 250

    Continental shelf, Environmental impact statements, Environmental 
protection, Government contracts, Incorporation by reference, 
Investigations, Mineral royalties, Oil and gas development and 
production, Oil and gas exploration, Oil and gas reserves, Penalties, 
Pipelines, Public lands--mineral resources, Public lands--rights-of-
way, Reporting and recordkeeping requirements, Sulphur development and 
production, Sulphur exploration, 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 part 250 as follows:

PART 250--SUBPART M--UNITIZATION

    1. The authority citation for part 250 continues to read as 
follows:

    Authority: 43 U.S.C. 1334.

    2. Subpart M is revised to read as follows:

Subpart M--Unitization

Sec.
250.190  What is the purpose of this subpart?
250.191  What are the requirements for unitization?
250.192  What if I have a competitive reservoir on my lease?
250.193  How do I get approval for voluntary unitization?
250.194  How will MMS require unitization?

Subpart M--Unitization


Sec. 250.190  What is the purpose of this subpart?

    This subpart explains how Outer Continental Shelf (OCS) leases are 
unitized. If you are an OCS lessee, use the regulations in this subpart 
for both voluntary and required unitization situations. The purpose of 
unitization is to:
    (a) Conserve natural resources;
    (b) Prevent waste; and/or
    (c) Protect correlative rights, including Federal royalty 
interests.


Sec. 250.191  What are the requirements for unitization?

    (a) Voluntary unitization. You and other OCS lessees may ask the 
Regional Supervisor to approve a request for voluntary unitization. The 
Regional Supervisor may approve the request for voluntary unitization 
if unitized operations:
    (1) Will promote and expedite lease exploration and development; or
    (2) Are necessary to prevent waste, conserve natural resources, or 
protect correlative rights, including Federal royalty interests, of a 
reasonably delineated and productive reservoir.
    (b) Compuslory unitization. The Regional Supervisor may require you 
and other lessees to unitize operations if unitized operations are 
necessary to prevent waste, conserve natural resources, or protect 
correlative rights of a reasonably delineated and productive reservoir.
    (c) Unit area. The area that a unit includes is the minimum number 
of leases that will allow the lessees to minimize the number of 
platforms, facility installations, and wells necessary for efficient 
exploration, development, and production. A unit may include whole 
leases of portions of leases.
    (d) Unit agreement. You and the other lessees of the leases in the 
unit must enter into a unit agreement that allocates benefits to 
unitized leases. The unit agreement must designate a unit operator and 
specify the effective date of the unit agreement. A unit agreement of 
terminates when the unit no longer produces unitized substances and the 
unit operator no longer conducts drilling or well-workover operations 
under the unit agreement, unless the Director orders or approves a 
suspension of production under Sec. 250.10.
    (e) Unit operating agreement. The unit operator and the owners of 
working interests in the unitized leases must enter into a unit 
operating agreement. The unit operating agreements must describe how 
all the unit participants will apportion all costs and liabilities 
incurred maintaining or conducting operations. When a unit involves one 
or more net-profit-share leases, the unit operating agreement must 
describe how to attribute costs and credits to the net-profit-share 
lease(s).
    (f) Termination or adjustment of a unit agreement. If your unit 
agreement expires or terminates, or if MMS adjusts the unit area to 
exclude your lease from the unit, your lease expires unless:
    (1) Its initial term has not expired;
    (2) You conduct drilling, production, or well-reworking operations 
on your lease consistent with applicable regulations; or
    (3) MMS orders or approves a suspension of production or operations 
for your lease.
    (g) Unit operations. If your lease is subject to a unit agreement, 
the entire lease continues for the term provided in the lease and as 
long thereafter as any portion of your lease remains part of the unit 
area, and as long as operations continue the unit in effect.
    (1) Drilling, production, and well-reworking operations performed 
on any lease in accordance with the unit agreement benefit all leases 
in the unit. If your unit ceases drilling activities for a period 
between the discovery and delineation of one or more reservoirs and the 
initiation of actual development and production operations and that 
time period would extend beyond your lease's primary term, you must 
request and obtain MMS approval of a suspension of production under 
Sec. 250.10.
    (2) When a lease in a unit agreement is beyond the primary term and 
the lease or unit is not producing, the lease will expire unless:
    (i) You conduct a continuous drilling or well reworking program 
designed to develop or restore the lease or unit production; or
    (ii) MMS orders or approves a suspension of operations under 
Sec. 250.10.


Sec. 250.192  What if I have a competitive reservoir on my lease?

    (a) The Regional Supervisor may require you to conduct development 
and production operations in a competitive reservoir under either a 
voluntary joint Development and Production Plan or a unitization 
agreement. A competitive reservoir has one or more producing or 
producible well completions on each of two or more leases, or portions, 
with different owners. For purposes of this paragraph, a producible 
well completion is a well which is capable of production and which is 
shut in but not necessarily connected to production facilities, and 
from which the operator plans future production.
    (b) You may request that the Regional Supervisor make a preliminary 
determination whether a reservoir is competitive. When you receive the 
preliminary determination, you have 30 days (or longer if the Regional 
Supervisor allows additional time) to concur or to submit an objection 
with supporting evidence if you do not concur. The Regional Supervisor 
will make a final determination and notify you.

[[Page 28528]]

    (c) If you conduct drilling or production operations in a 
competitive reservoir, you and the other affected lessees must submit 
for approval a joint plan of operations. You must submit the joint plan 
within 90 days after the Regional Supervisor makes a final 
determination that the reservoir is competitive. The joint plan must 
provide for the development and/or production of the reservoir. You may 
submit supplemental plans for the Regional Supervisor's approval.
    (d) If you and the other affected lessees cannot reach an agreement 
on a joint Development and Production Plan within the approved period 
of time, each lessee must submit a separate plan to the Regional 
Supervisor. The Regional Supervisor may hold a hearing to resolve 
differences in the separate plans. If the differences in the separate 
plans are not resolved at the hearing and the Regional Supervisor 
determines that unitization is necessary under Sec. 250.191(b), MMS 
will initiate unitization under Sec. 250.194.


Sec. 250.193  How do I get approval for voluntary unitization?

    (a) You must file a request with the Regional Supervisor for 
approval of a unit. Your request must include:
    (1) A draft of the proposed unit agreement;
    (2) A proposed initial plan of operation;
    (3) Supporting geological, geophysical, and engineering data; and
    (4) Other information that may be necessary to show that the 
unitization proposal meets the criteria of Sec. 250.190.
    (b) The unit agreement must comply with the requirements of this 
part. MMS will provide a model unit agreement for you to follow. If you 
make changes to the model agreement, you must obtain the approval of 
the Regional Supervisor.
    (c) After the Regional Supervisor approves your unitization 
proposal, you and the unit operator must sign it and file copies of the 
unit agreement, the unit operating agreement, and the plan of operation 
with the Regional Supervisor.


Sec. 250.194   How will MMS require unitization?

    (a) If the Regional Supervisor determines that unitization of 
operations within a proposed unit area is necessary to prevent waste, 
conserve natural resources of the OCS, or protect correlative rights, 
including Federal royalty interests, the Regional Supervisor may order 
unitization according to a plan for unitization. This plan will conform 
to the model unit agreement available from the Regional Supervisor 
unless the Regional Supervisor approves a variation.
    (b) If you ask MMS to compel unitization, you must file a request 
with the Regional Supervisor. Include a proposed unit agreement as 
described in Sec. 250.192(b), a proposed unit operating agreement, and 
a proposed initial plan of operation together with supporting 
geological, geophysical, and engineering data, and any other 
information that may be necessary to show that unitization meets the 
criteria of Sec. 250.190. The proposed unit agreement must include a 
counterpart executed by each lessee seeking compulsory unitization. 
Lessees seeking compulsory unitization must simultaneously serve, on 
the non-consenting lessees, copies of:
    (1) The request;
    (2) The proposed unit agreement with executed counterparts;
    (3) The proposed unit operating agreement; and
    (4) The proposed initial plan of operation.
    (c) If the Regional Supervisor initiates compulsory unitization, 
MMS will serve all lessees of the proposed unit area with a copy of the 
plan for unitization and a statement of reasons for the proposed 
unitization.
    (d) The Regional Supervisor will not compel unitization until MMS 
provides all lessees of the proposed unit area written notice and an 
opportunity for a hearing. If you want MMS to hold a hearing, you must 
request it within 30 days after you receive written notice from the 
Regional Supervisor or after you are served with a request for 
compulsory unitization from anther lessee.
    (e) MMS will not hold a hearing under this paragraph until at least 
30 days after MMS provides written notice of the hearing date to all 
parties owning interests which would be made subject to the unit 
agreement. The Regional Supervisor must give all lessees of the 
proposed unit area an opportunity to submit views orally or in writing 
and to question both those seeking and those opposing compulsory 
unitization. Adjudicatory procedures are not required. The Regional 
Supervisor will make a decision based upon a record of the hearing, 
including any written information made a part of the record. The 
Regional Supervisor will arrange for a court reporter to make a 
verbatim transcript. The party seeking compulsory unitization must pay 
for the court reporter and pay for and provide to the Regional 
Supervisor within 10 days after the hearing three copies of the 
verbatim transcript, made by a court reporter.
    (f) The Regional Supervisor will issue an order that requires or 
rejects compulsory unitization. That order must include a statement of 
reasons for the action taken including identification of those parts of 
the record which form the basis of the decision. Any party may appeal 
the final order of the Regional Supervisor under 30 CFR part 290.

[FR Doc. 96-13990 Filed 6-4-96; 8:45 am]
BILLING CODE 4310-MR-M