[Federal Register Volume 62, Number 44 (Thursday, March 6, 1997)] [Proposed Rules] [Pages 10247-10248] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 97-5493] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF THE INTERIOR Minerals Management Service 30 CFR Parts 202 and 206 RIN 1010-AB57 Amendments to Gas Valuation Regulations for Indian Leases AGENCY: Minerals Management Service, Interior. ACTION: Notice of meeting and reopening of public comment period. ----------------------------------------------------------------------- SUMMARY: The Minerals Management Service (MMS) is reopening the public comment period for a proposed rule published in the Federal Register on September 23, 1996, 61 FR 49894, amending its regulations governing the valuation for royalty purposes of natural gas produced from Indian leases. DATES: Comments must be submitted on or before April 4, 1997. The committee meeting will be on March 26, 1997. ADDRESSES: MMS will hold a meeting of the Indian Gas Valuation Negotiated rulemaking committee on March 26, 1997, in the conference room at: Golden Hill Office Complex, 12600 West Colfax Avenue, Suite B200, Golden, Colorado. Written comments, suggestions, or objections regarding this proposed amendment should be sent to the following addresses. For comments sent via the U.S. Postal Service use: Minerals Management Service, Royalty Management Program, Rules and Publications Staff, P.O. Box 25165, MS 3101, Denver, Colorado 80225-0165. For comments via courier or overnight delivery service use: Minerals Management Service, Royalty Management Program, Rules and Publications Staff, MS 3101, Building 85, Denver Federal Center, Room A-212, Denver, Colorado 80225-0165. FOR FURTHER INFORMATION CONTACT: David S. Guzy, Chief, Rules and Publications Staff, phone (303) 231- 3432, FAX (303) 231-3194, e-Mail David__G[email protected]. FOR FURTHER INFORMATION CONTACT: David S. Guzy, Chief, Rules and Procedures Staff, at (303) 231-3432. I. SUPPLEMENTARY INFORMATION: Background On September 23, 1996, MMS published a notice of proposed rulemaking in the Federal Register (61 FR 49894) to amend the valuation regulations for gas production from Indian leases. The framework for the proposed rule was the product of an Indian Gas Valuation Negotiated Rulemaking Committee. The proposed rulemaking provided for a 60-day comment period, which ended November 22, 1996, and was extended to December 3, 1996, by a Federal Register Notice (61 FR 59849, November 25, 1996). during the public comment period MMS received 13 written comments: 7 responses from industry, 4 from industry trade groups or associations, 1 from an Indian tribe, and 1 from an Indian agency. A public hearing was held in Oklahoma City, Oklahoma, on October 23, 1996. II. Comments on Proposed Rule MMS proposed to revise the current regulations regarding the valuation of gas production from Indian leases to accomplish the following:To ensure that Indian mineral lessors receive the maximum revenues from mineral resources on their land consistent with the Secretary of the [[Page 10248]] Interior's (Secretary) trust responsibility and lease terms; and, To improve the regulatory framework so that information is available which would permit lessees to comply with the regulatory requirements at the time that royalties were due. All commenters endorsed the concept of revising the existing regulations to provide simplicity and certainty, decrease administrative costs, and decrease litigation. Industry generally supports the use of independent published index prices for valuing gas produced from Indian leases. Industry also supports the concept of an alternative ``percentage increase'' to satisfy the dual accounting requirement contained in most Indian leases to the extent the use of this alternative methodology is voluntarily chosen by the lessee. Industry does not support the language in the proposed rule and objects to: the safety net concept for nondedicated sales, the separate dual accounting requirement on natural gas liquids, and the gross proceeds requirement if gas production was subject to a previous contract which was the subject of a gas contract settlement. The Council of Petroleum Accountants Societies (COPAS) states ``The COPAS representative on the Committee voted in favor of the original index-based formula at the Committee's May, 1995 meeting based on the belief that the use of that formula would satisfy both the gross proceeds and major portion clauses contained in most Indian leases, with the exception of gas sold under certain high-priced contracts.'' MMS agrees the gross proceeds requirement in the proposed rule dealing with the issue of gas contract settlements changed the Committee's agreement that the index formula was to replace both the gross proceeds requirement and the major portion requirement. The MMS would like to receive comments on a concept where contract settlement proceeds would be royalty bearing, but would not require a monthly gross proceeds comparison to the index formula. MMS will view contract settlement proceeds to be part of gross proceeds when value is determined by gross proceeds such as for production from a dedicated contract, or in nonindex areas where the initial value is determined under the gross proceeds context. For index areas, MMS will require the gross proceeds of gas sold under nondedicated contracts to be calculated only if the contract settlement proceeds per MMBTU when added to the 80 percent of the safety net price exceeds the formula value for the month including any increase for dual accounting. This computation would be made after the safety net prices were reported to the MMS by the lessee. Specifically, under this concept, MMS would revise Sec. 206.172(b)(2)(ii) to read as follows: This paragraph applies to gas not sold under a dedicated contract and that was subject to a previous contract which was part of a gas contract settlement. If the contract settlement proceeds per MMBTU added to the 80 percent of the safety net prices calculated at Sec. 206.172(e)(4)(i) exceeds the index-based value that applies to the gas under this section (including any adjustments required under Sec. 206.176), then the value of the gas is the higher of the value determined under this section (including any adjustments required under Sec. 206.176) or Sec. 206.174. MMS specifically requests comments on these revised paragraphs. You do not need to comment on the rest of the rule. MMS will respond to all comments in a final rule. February 28, 1997. Lucy R. Querques, Associate Director for Royalty Management. [FR Doc. 97-5493 Filed 3-5-97; 8:45 am] BILLING CODE 4310-MR-M