[Federal Register Volume 63, Number 164 (Tuesday, August 25, 1998)]
[Notices]
[Pages 45253-45254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-22800]


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DEPARTMENT OF THE INTERIOR

Minerals Management Service


Outer Continental Shelf Western Gulf of Mexico; Notice of Leasing 
Systems, Sale 171

    Section 8(a)(8) (43 U.S.C. 1337(a)(8)) of the Outer Continental 
Shelf Lands Act (OCSLA) requires that, at least 30 days before any 
lease sale, a Notice be submitted to the Congress and published in the 
Federal Register:
    1. identifying the bidding systems to be used and the reasons for 
such use; and
    2. designating the tracts to be offered under each bidding system 
and the reasons for such designation.
    This Notice is published pursuant to these requirements.
    1. Bidding systems to be used. In the Outer Continental Shelf (OCS) 
Sale 171, blocks will be offered under the following two bidding 
systems as authorized by section 8(a)(1) (43 U.S.C. 1337(a)(1)), as 
amended: (a) bonus bidding with a fixed 16\2/3\-percent royalty on all 
unleased blocks in less than 200 meters of water; and (b)(i) bonus 
bidding with a fixed 16\2/3\-percent royalty on all unleased blocks in 
200 to 400 meters of water with potential for a royalty suspension 
volume of up to 17.5 million barrels of oil equivalent; (ii) bonus 
bidding with a fixed 12\1/2\-percent royalty on all unleased blocks in 
400 to 800 meters of water with potential for a royalty suspension 
volume of up to 52.5 million barrels of oil equivalent; and (iii) bonus 
bidding with a fixed 12\1/2\-percent royalty on all unleased blocks in 
water depths of 800 meters or more with potential for a royalty 
suspension volume of up to 87.5 million barrels of oil equivalent.
    For bidding systems (b)(i), (ii), and (iii), the royalty suspension 
allocation rules are described in the Interim Rule (30 CFR Part 260) 
addressing royalty relief for new leases that was published in the 
Federal Register on March 25, 1996 (61 FR 12022).
    a. Bonus Bidding with a 16\2/3\-Percent Royalty. This system is 
authorized by section (8)(a)(1)(A) of the OCSLA. This system has been 
used extensively since the passage of the OCSLA in 1953 and imposes 
greater risks on the lessee than systems with higher contingency 
payments but may yield more rewards if a commercial field is 
discovered. The relatively high front-end bonus payments may encourage 
rapid exploration.
    b.(i) Bonus Bidding with a 16\2/3\-Percent Royalty and a Royalty 
Suspension Volume (17.5 million barrels of oil equivalent). This system 
is authorized by section (8)(a)(1)(H) of the OCSLA, as amended. This 
system complies with Sec. 304 of the Outer Continental Shelf Deep Water 
Royalty Relief Act (DWRRA). An incentive for development and production 
in water depths of 200 to 400 meters is provided through allocating 
royalty suspension volumes of 17.5 million barrels of oil equivalent to 
eligible fields.
    b.(ii) Bonus Bidding with a 12\1/2\-Percent Royalty and a Royalty 
Suspension Volume (52.5 million

[[Page 45254]]

barrels of oil equivalent). This system is authorized by section 
(8)(a)(1)(H) of the OCSLA, as amended. It has been chosen for blocks in 
water depths of 400 to 800 meters proposed for the Western Gulf of 
Mexico (Sale 171) to comply with Sec. 304 of the DWRRA. The 12\1/2\-
percent royalty rate is used in deeper water because these blocks are 
expected to require substantially higher exploration, development, and 
production costs, as well as longer times before initial production, in 
comparison to shallow-water blocks. The use of a royalty suspension 
volume of 52.5 million barrels of oil equivalent for eligible fields 
provides an incentive for development and production appropriate for 
this water depth category.
    b.(iii) Bonus Bidding with a 12\1/2\-Percent Royalty and a Royalty 
Suspension Volume (87.5 million barrels of oil equivalent). This system 
is authorized by section (8)(a)(1)(H) of the OCSLA, as amended. It has 
been chosen for blocks in water depths of 800 meters or more proposed 
for the Western Gulf of Mexico (Sale 171) to comply with Sec. 304 of 
the DWRRA. The use of a royalty suspension volume of 87.5 million 
barrels of oil equivalent for eligible fields provides an incentive for 
development and production appropriate for these deep-water depths.
    2. Designation of Blocks. The selection of blocks to be offered 
under the four systems was based on the following factors:
    a. Royalty rates on adjacent, previously leased tracts were 
considered to enhance orderly development of each field.
    b. Blocks in deep water were selected for the 12\1/2\-percent 
royalty system based on the favorable performance of this system in 
these high-cost areas in past sales.
    c. The royalty suspension volumes were based on the water depth 
specific volumes mandated by the DWRRA.
    The specific blocks to be offered under each system are shown on 
the ``Lease Terms, Bidding Systems, and Royalty Suspension Areas, Sale 
171'' map for Western Gulf of Mexico Lease Sale 171. This map is 
available from the Public Information Unit, Minerals Management 
Service, 1201 Elmwood Park Boulevard, New Orleans, Louisiana 70123-
2394.

    Dated: July 20, 1998.
Cynthia L. Quarterman,
Director, Minerals Management Service.

    Approved:
Bob Armstrong,
Assistant Secretary, Land and Minerals Management.
[FR Doc. 98-22800 Filed 8-24-98; 8:45 am]
BILLING CODE 4310-MR-P