[Federal Register Volume 61, Number 211 (Wednesday, October 30, 1996)]
[Rules and Regulations]
[Pages 55885-55887]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-27783]


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DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 250

RIN 1010-AC07


Allow Lessees More Flexibility in Keeping Leases in Force Beyond 
Their Primary Term

AGENCY: Minerals Management Service (MMS), Interior.

ACTION: Final rule.

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SUMMARY: This final rule amends regulations that specify how Outer

[[Page 55886]]

Continental Shelf (OCS) lessees can continue their leases beyond their 
primary term. Changes in industry exploration practices have increased 
the time necessary to collect and analyze data associated with 
operations. The changes increase from 90 to 180 days the time allowed 
between operations for a lease continued beyond its primary term.

EFFECTIVE DATE: November 29, 1996.

FOR FURTHER INFORMATION CONTACT:
Lawrence H. Ake or John Mirabella, Engineering and Standards Branch, 
telephone (703) 787-1600.

SUPPLEMENTARY INFORMATION:

I. Background and Purpose

    On March 1, 1994, the Department of the Interior (DOT) published a 
notice in the Federal Register (59 FR 9718-9719), requesting comments 
and suggestions on DOI agency regulations. In its notice, DOI announced 
its intention to periodically review its regulations and asked the 
public to participate in the review. Over 40 responses were received 
concerning MMS regulations from the public, industry, and Government.
    Several letters suggested that MMS make changes to Subpart A of 30 
CFR Part 250. These comments proposed allowing 180 days between 
drilling, well-reworking, or other operations in order to keep a lease 
in effect beyond its primary term.
    Commenters told MMS that although many OCS operations can be ended 
and recommenced within the present 90-day time allowance, many require 
considerably more time. The comments went on to say that the search for 
oil and gas resources in the OCS has reached a mature phase. Most of 
the easily found resources have been produced. Industry is now focusing 
its efforts in deeper waters, on subsalt projects, and other areas of 
extremely complex geology. The changes these commenters proposed would 
allow more time for efficient and expedient production, drilling, and 
well-reworking operations.
    MMS held a public meeting in New Orleans on June 12, 1995, to 
discuss this and other issues. Based on the comments heard at that 
meeting, as well as those previously received, a notice of proposed 
rulemaking (NPR) was prepared for public comment. On April 25, 1996, an 
NPR was published in the Federal Register (61 FR 18309) which proposed 
to increase from 90 to 180 days the time allowed between operations for 
a lease continued beyond its primary term.

II. Discussion of the Rule

    Under current MMS regulations (30 CFR 250.13 and 256.37(b)), if no 
production, drilling, or well-reworking activities occur on the lease 
during the last 90 days prior to lease expiration and no suspension of 
operations or production is in effect on the lease, the lease expires 
by law and lease term.
    Current Sec. 250.13 gives lessees several methods to keep leases in 
effect beyond their primary term. The most common method is through 
production of resources and payment of a royalty. Continuous drilling 
or well-reworking activities without a break of more than 90 days will 
also keep a lease in effect beyond its primary term. Other methods for 
extending a lease include receiving a suspension of production (30 CFR 
250.10); a suspension of operations (30 CFR 250.10); or participation 
in a unit which has another lease that is being held beyond its primary 
term by one of these operations (30 CFR 250.190 (e) and (f)).
    With this rulemaking, MMS increases from 90 to 180 days the time 
allowed between production, drilling, or well-reworking operations for 
leases continued beyond their primary term. For example, under the 
current rule if a lessee ceases production, drilling or well-reworking 
operations on a lease 60 days before the lease expiration date, he must 
resume operations within 90 days (i.e., within 30 days after the 
original lease expiration date). In this example, the new rule would 
allow the lessee 180 days (i.e., 120 days after the original lease 
expiration date) within which to resume operations.
    Leases that have been continued past their primary term will remain 
in force as long as the break in operations is no longer than 180 days. 
This contrasts with 90 days provided by the current rule.

III. Discussion of Comments

    Comment: MMS received 21 letters commenting on the NPR. Seventeen 
of the letters received were supportive of the proposed rule. Many of 
these comments cited how the extra time allowed would allow for better 
analysis of geological, geophysical, and engineering data. Others noted 
that the additional time would provide relief when analyzing subsalt or 
deepwater prospects. Still others spoke of the beneficial effects the 
rule would have when confronting time-consuming projects, such as 
working out cost-sharing arrangements with other operators or analyzing 
3D seismic data.
    Four letters provided comments that were critical of some aspect of 
the proposed rule. Two of these commenters supported the need of 
lessees and operators for more flexibility to keep their leases in 
effect, but felt that the extension of time to 180 days should be 
handled on a case-by-case basis. These commenters were concerned that 
the proposed rule could unnecessarily tie up some untested OCS acreage 
and thus slow the discovery of additional resources. One commenter 
opposed any open-ended authority for the Regional Supervisor to extend 
time limits beyond those in the proposed rule. Still another noted that 
the rule provides no assurance that the additional time granted to 
lessees will result in additional operations on the lease.
    Response: One of the primary missions of the MMS is ensuring the 
orderly and expeditious exploration and development of the OCS. With 
this rule, we attempt to strike a balance between encouraging diligent 
operations and allowing proper time for lessees to evaluate their 
exploratory and development options. We agree with the majority of 
commenters that this rule change recognizes a need of industry. This 
extra time is frequently needed for detailed analysis of geological, 
geophysical, or engineering data. It also provides operators an 
opportunity to better evaluate deep-water and subsalt drilling 
prospects. However, the rule specifically states that any drilling or 
well-reworking program must be part of a plan that has as its objective 
continuous production on the lease. MMS intends to closely monitor the 
actions of lessees to ensure that this objective is met. MMS also fully 
expects that the 180 day timeframe will provide sufficient time for all 
but extraordinary delays. MMS will closely scrutinize all requests for 
more than 180 days between operations on leases beyond their primary 
term.
    Comment: Another commenter suggested that a lease be extended for 
180 days past the expiration date of the lease term if operations were 
conducted at any time during the last 180 days of the lease term. This 
commenter felt that this change would simplify the rule and help to 
avoid any misunderstanding of the time remaining on the lease.
    Response: This comment was not accepted. MMS feels that the rule 
should be applied consistently, whether the lease is just passing its 
primary term or has previously been extended through continuous 
operations.
    Comment: One of the comments was more editorial in nature. This 
comment pointed out that the wording in Sec. 250.13(a)(2) of the NPR 
was ambiguous. The commenter also stressed that by changing to a 
``plain

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English'' format, MMS may sacrifice clarity.
    Response: The cited wording has been changed. MMS will attempt to 
write all of its rules as clearly as possible.

Executive Order (E.O.) 12866

    This is a significant rule under E.O. 12866 and has been reviewed 
by the Office of Management and Budget (OMB).

Regulatory Flexibility Act

    The DOI determined that this rule will not have a significant 
effect on a substantial number of small entities. In general, the 
entities that engage in offshore activities are not considered small 
due to the technical and financial resources and experience necessary 
to safely conduct such activities. Small entities are more likely to 
operate onshore or in State waters--areas not covered by this 
regulation. When small entities work in the OCS, they are more likely 
to be contractors than operators. For example, a company that collects 
geologic and geophysical data might be a small entity. While these 
contractors must follow the rules governing OCS operations, we are not 
changing the rules that govern the actual operations on a lease. We are 
only modifying the rules governing the extension of a lease beyond the 
primary term. The rule could have a secondary effect. By extending the 
time available to the lessee, more leases may be active and this could 
result in an increase in opportunities for small entities to collect 
data or perform other services. The added time could also work to 
benefit smaller companies who may have slower computers and could 
benefit from a longer time period for review of data.

Paperwork Reduction Act

    This rule has been examined under the Paperwork Reduction Act of 
1995 and has been found to contain no reporting and information 
collection requirements.

Takings Implication Assessment

    The DOI determined that this rule does not represent a governmental 
action capable of interference with constitutionally protected property 
rights. Thus, DOI does not need to prepare a Takings Implication 
Assessment pursuant to E.O. 12630, Government Action prepare a Takings 
Implication Assessment pursuant to E.O. 12630, Government Action and 
Interference with Constitutionally Protected Property Rights.

Executive Order (E.O.) 12988

    The DOI has certified to OMB that the rule meets the applicable 
reform standards provided in Sections 3(a) and 3(b)(2) of E.O. 12988.

Unfunded Mandate Reform Act of 1995

    The DOI has determined and certifies according to the Unfunded 
Mandates Reform Act, 2 U.S.C. 1502 et seq., that this rule will not 
impose a cost of $100 million or more in any given year on local, 
tribal, State governments, or the private sector.

National Environmental Policy Act

    The DOI determined that this action does not constitute a major 
Federal action significantly affecting the quality of the human 
environment; therefore, an Environmental Impact Statement is not 
required.

List of Subjects in 30 CFR Part 250

    Continental shelf, Environmental impact statement, 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.

    Dated: October 2, 1996.
Sylvia V. Baca,
Deputy Assistant Secretary, Land and Minerals Management.

    For the reasons set forth in the preamble, Minerals Management 
Service (MMS) amends 30 CFR Part 250 as follows:

PART 250--OIL AND GAS AND SULPHUR OPERATIONS IN THE OUTER 
CONTINENTAL SHELF

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

    Authority: 43 U.S.C. 1334.

    2. Section 150.13 is revised to read as follows:


Sec. 250.13  How Does Production, Drilling, or Well-reworking Affect 
Your Lease Term?

    (a) Your lease expires at the end of its primary term unless you 
are producing or conducting drilling or well-reworking operations on 
your lease. See Sec. 256.37(b) of this title. Also, any drilling or 
well-reworking program must be part of a plan that has as its objective 
continuous production on the lease. For purposes of this section, the 
term ``operations'' means production, drilling, or well-reworking.
    (b) If you stop conducting operations during the last 180 days of 
the primary lease term, your lease will remain in effect beyond the 
primary term only if you:
    (1) Resume operations on the lease no later than 180 days after the 
operations ended; or
    (2) Ask MMS for a suspension of operations or production under 30 
CFR 150.10 before the 180th day after you stop operations, and 
thereafter receive the Regional Supervisor's approval; or
    (3) Receive a directed suspension of operations or production from 
the Regional Supervisor under 30 CFR 250.10 before the 180th day after 
you stop operations.
    (c) If you stop conducting operations on a lease that has continued 
beyond its primary term, then your lease will expire unless you comply 
with either paragraph (b)(1), (b)(2), or (b)(3) of this section.
    (d) You may ask the Regional Supervisor to allow you more than 180 
days to resume operations on a lease continued beyond its primary term 
when operating conditions warrant. The request must be writing and 
explain the operating conditions that warrant a longer period. In 
allowing additional time, the Regional Supervisor must determine that 
the longer period is in the national interest and that it conserves 
resources, prevents waste, or protects correlative rights.

[FR Doc. 96-27783 Filed 10-29-96; 8:45 am]
BILLING CODE 4310-MR-M