[Federal Register Volume 63, Number 216 (Monday, November 9, 1998)]
[Notices]
[Pages 60380-60383]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-29914]


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DEPARTMENT OF THE INTERIOR

Minerals Management Service


Notice of Revision of Form MMS-2005, Oil and Gas Lease of 
Submerged Lands Under the Outer Continental Shelf Lands Act

AGENCY: Minerals Management Service, Interior.

ACTION: Notice.

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SUMMARY: MMS has determined that Form MMS-2005, the lease document, 
needs revision due to changes in regulations since it was last reviewed 
in 1986. MMS has revised the form to reflect plain language and has 
rewritten it for clarity and organization. To reduce the need for 
future revisions to the document due to changes in regulations, MMS 
refers the Lessee to applicable laws, and rules and regulations of the 
Department. Much of the wording of existing Form MMS 2005 that 
specifically cites, incorporates by reference, or restates statutory 
and regulatory requirements is therefore deleted from the proposed 
revision.

DATES: MMS will accept comments on this document on or before December 
24, 1998, and will schedule a workshop during the comment period.

ADDRESSES: Comments may be sent to Terry Holman, Minerals Management

[[Page 60381]]

Service, Mail Stop 4230, 1849 C Street, NW, Washington, D.C. 20240.

SUPPLEMENTARY INFORMATION: The Lease Sale Document form MMS-2005, is 
the written contract between the U.S. Government and those wishing to 
lease the submerged lands of the Outer Continental Shelf for 
exploration, development and production of oil and natural gas 
resources. Section 1 explicitly states that the lease is subject to the 
Notice of Lease Sale, the Outer Continental Shelf Lands Act, and all 
applicable rules and regulations of the Secretary of the Interior and 
Executive Orders issued by the President. Provisions that restate 
regulations have been deleted from the document. A section-by-section 
description of the proposed changes is presented below.

------------------------------------------------------------------------
                Old form                             New form
------------------------------------------------------------------------
Top of the form above the double line..  The statement concerning
                                          information collection has
                                          been revised to indicate that
                                          the form contains information
                                          collection requirements that
                                          have been approved by the
                                          Office of Management and
                                          Budget. Headings in the upper
                                          right are revised for clarity.
                                          The Net Profit Share heading
                                          is replaced with Other to
                                          accommodate the recording of a
                                          broader range of special terms
                                          that might pertain to a lease.
Section 1: Statutes and Regulations....  This section was rewritten to
                                          clarify that the lease is
                                          subject to the OCS Lands Act,
                                          the Lease Sale Notice, and all
                                          applicable laws, rules,
                                          regulations, and Executive
                                          Orders issued by the President
                                          as of the date of the lease
                                          and in the future. The revised
                                          section contains a specific
                                          reference to the Notice of
                                          Sale which was not included in
                                          the previous version of the
                                          document. Since many sections
                                          have been removed from the
                                          lease document because the
                                          requirements exist in various
                                          regulations, this statement
                                          affirms that the lessee
                                          remains responsible for
                                          elements not expressly stated
                                          in the lease.
Section 2: Rights of Lessee............  Retitled Rights Granted to the
                                          Lessee. Rewritten in plain
                                          language.
Section 3: Term........................  Rewritten in plain language.
Section 4: Rental......................  Four sections combined in one
                                          renumbered and retitled
                                          Section 7 Payment of Rent and
                                          Royalty. Provisions deleted
                                          because they are redundant of
                                          43 USC 1337; 30 CFR part 206,
                                          subpart C, 30 CFR 202.100; and
                                          30 CFR part 218, subparts B
                                          and D. Rewritten in plain
                                          language.
Section 5: Minimun Royalty.............  See note on section 4 above.
Section 6: Royalty on Production.......  See note on section 4 above.
Section 7: Payments....................  See note on section 4 above.
                                          Clarifies when payments are
                                          due and how value of
                                          production is calculated. We
                                          added additional language to
                                          make express the existing
                                          implied covenant to market
                                          production for the mutual
                                          benefit of the Lessee and the
                                          Lessor. We also added that
                                          delivery of resources taken in
                                          kind shall be made to a point
                                          designated by the Lessor.
Section 8: Bonds.......................  Provision deleted because it is
                                          redundant of 30 CFR part 256,
                                          subpart I.
Section 9: Plans.......................  Provision deleted because it is
                                          redundant of 30 CFR part 250,
                                          subpart B.
Section 10: Performance................  Renumbered and retitled Section
                                          8 Diligent Operations.
                                          Rewritten in plain language.
Section 11: Directional Drilling.......  Provision deleted because it is
                                          redundant of 30 CFR 256.71.
Section 12: Safety Requirements........  Provision deleted because it is
                                          redundant of 30 CFR 250.120-
                                          122 22 and 43 U.S.C. 1347 and
                                          1348.
Sectioni 13: Suspension and              Provision deleted because it is
 Cancellation.                            redundant of 30 CFR 250.110,
                                          250.112 and 43 U.S.C. 1334.
Section 14: Indemnification............  Renumbered section 4. Rewritten
                                          in plain language. Clarifies
                                          that only successful appeal of
                                          an MMS order, not mere pursuit
                                          of an appeal, could exempt the
                                          lessee from liability for loss
                                          or damage to property or
                                          injury to persons resulting
                                          from compliance with the
                                          order.
Section 15: Disposition of Production..  Provision deleted because it is
                                          redundant of 43 U.S.C. 1353
                                          and 43 U.S.C. 1337.
Section 16: Unitization, Pooling, and    Provision deleted because it is
 Drilling Agreements.                     redundant of 30 CFR part 250,
                                          subpart M.
Section 17: Equal Opportunity Clause...  Provision deleted because it is
                                          redundant of 41 CFR 6-1.4(a)
                                          and Executive Order 11246.
Section 18: Certification of             Effective September 18, 1997,
 Nonsegregated Facilities.                the Labor Department amended
                                          its regulations and 41 CFR 60-
                                          1.8(b) has been deleted. (See
                                          rulemaking at 62 FR 44174
                                          (Aug. 19, 1997). The amended
                                          60-1.8 requires the contractor
                                          maintain a non-segregated
                                          workplace, but no longer
                                          relies on certification of the
                                          contractor.
Section 19: Reservations to Lessor.....  Renumbered section 6. Rewritten
                                          in plain language.
Section 20: Transfer of Lease..........  Provision deleted because it is
                                          redundant of 30 CFR part 256,
                                          subpart J and 43 U.S.C. 1334.
Section 21: Surrender of Lease.........  Provision deleted because it is
                                          redundant of 30 CFR part
                                          256.76 and 43 U.S.C. 1334.

[[Page 60382]]

Section 22: Removal of Property on       Renumbered section 9. Rewritten
 Termination of Lease.                    to specify time for submission
                                          of a plan for well abandonment
                                          and platform removal (within 3
                                          months of lease termination).
                                          Also would authorize lessor to
                                          take title to property not
                                          removed within the prescribed
                                          time.
Section 23: Remedies in Case of Default  Renumbered section 10 and
                                          retitled Remedies for Lessee
                                          Non-Compliance. Rewritten in
                                          plain language.
Section 24: Unlawful Interest..........  Provision deleted because it is
                                          redundant of 41 U.S.C. 22 and
                                          18 U.S.C. 431-433.
                                         Section 5 Access to Records is
                                          a new section. It implements
                                          and clarifies the requirements
                                          of 30 CFR 207.5, 212.51 and
                                          250.121 and implements section
                                          103 of the Federal Oil and Gas
                                          Royalty Management Act. In
                                          particular, it would require
                                          disclosure to authorize
                                          representatives of the lessor
                                          of documents in the possession
                                          of ``affiliates,'' which have
                                          been found to be covered
                                          ``other persons'' under 30 CFR
                                          212.51 in Shell Oil Co. v.
                                          Babbitt, 125 F.3d 172 (3rd
                                          Cir. 1997), affirming 945
                                          F.Supp. 792, and Santa Fe
                                          Mineral v. McCutcheon, 90 F.3d
                                          409 (10th Cir. 1996).
------------------------------------------------------------------------

    The revised form is included below:

Form MMS-2005 (    1998)
(Supersedes MMS-2005 March 1986)

United States Department of the Interior Minerals Management Service

Oil and Gas Lease of Submerged Lands Under the Outer Continental Shelf 
Lands Act

This form contains information collection requirements that have 
been approved by the Office of Management and Budget. These 
approvals are found at 30 CFR 210.10, and 30 CFR 250.100.
Office

Serial Number

Cash Bonus

Rent per acre of fraction thereof________

Rent per hectare or fraction thereof________

$

Minimum royalty rate per acre or fraction thereof________

Minimum royalty rate per hectare or fraction thereof________

Royalty Rate

Other

    This lease contains approximately    acres    hectares (the 
``leased area''), described as follows:
    It is effective as of    (the ``Effective Date'') and will 
continue for an initial period of    years (the ``Initial Period'') 
by and between the United States of America (the ``Lessor''), by the 
Minerals Management Service (``MMS''), its authorized officer, and

(the ``Lessee''). In consideration of any payment made by the Lessee 
to the Lessor and in consideration of the promises, terms, 
conditions, and covenants contained herein, including the attached 
Stipulation(s)        numbered    , the Lessee and Lessor agree as 
follows:
    Sec. 1. Statutes and Regulations. This lease is issued under the 
Outer Continental Shelf Lands Act 43 U.S.C. 1331 et seq., as amended 
(the ``Act''), and the Notice of Sale ________dated ________.
    This lease is subject to the terms of that Notice, the Act, all 
applicable laws, and the rules and regulations of the Secretary of 
the Interior now or hereafter in effect, when not inconsistent with 
any express provision of this lease. This lease is also subject to 
all applicable Executive Orders issued by the President now or 
hereafter in effect.
    Sec. 2. Rights Granted to the Lessee. The Lessor grants to the 
Lessee the exclusive right to explore for, develop, and produce oil 
and gas resources, except helium gas, in the submerged lands of the 
Outer Continental Shelf. This right is subject to the Lessor's 
approval of plans and permits required under the Act and 
regulations.
    The Lessee also has the following rights:
    (a) the nonexclusive right to conduct geological and geophysical 
explorations according to applicable regulations;
    (b) the nonexclusive right to drill water wells, except wells in 
geopressured-geothermal and other geothermal reservoirs, and to use 
the water produced for operations under the Act free of cost. 
Drilling must be conducted according to procedures approved by the 
Lessor.
    (c) the right to construct and maintain devices and structures 
necessary to the full exercise of rights under the lease, subject to 
compliance with applicable laws and regulations.
    Sec. 3. Term. This lease will continue from the Effective Date 
of the lease for the Initial Period and as long as oil or gas is 
produced from the leased area in paying quantities, or drilling or 
well reworking operations (as approved by the Lessor) are conducted, 
or as otherwise extended under regulation.
    Sec. 4. Indemnification. The Lessee must indemnify the Lessor 
for any claim, including claims for loss or damage to property or 
injury to persons resulting from any operation on the leased area 
conducted by or on behalf of the Lessee. However, the Lessee is not 
responsible to the Lessor under this section for any loss, damage, 
or injury caused by or resulting from:
    (a) the Lessor's negligence, other than the commission or 
omission of a discretionary function or duty, or
    (b) the Lessee's compliance with an order of the Lessor against 
which the Lessee filed an administrative appeal if the appeal is 
filed before the cause of action for the claim arose and if the 
Lessee prevails in the administrative appeal or subsequent action 
for judicial review.
    Sec. 5. Access to Records. In accordance with regulations, if 
requested by the Lessor, the Lessee agrees to provide within a 
reasonable time to any authorized representative of the Department 
of the Interior all books, accounts, maps and any other records in 
the possession or under the control of the Lessee, its affiliates, 
or agents, that are relevant to operations, payments, disposition of 
the production, or any other activity occurring under this lease. 
The Lessee also agrees to keep these records open for inspection by 
any authorized representative at all reasonable times. This clause 
applies regardless of whether the records were prepared by or are 
under the control of the Lessee, or its affiliates, or agents. 
Information regarding disposition of the production includes, but is 
not limited to, all records regarding the sale or other disposition 
of oil or gas produced from the leased area by the Lessee or any of 
its affiliated or related entities.
    Sec. 6. Reservations to Lessor. All rights in the leased area 
not expressly granted to the Lessee by the Act, the regulations, or 
this lease are reserved to the Lessor. Reserved rights include, but 
are not limited to:
    (a) authorizing geological and geophysical exploration in the 
leased area which does not unreasonably interfere with or endanger 
actual operations under this lease;
    (b) granting easements or rights-of-way;
    (c) granting leases for any minerals other than oil and gas, 
provided that operations under such leases do not unreasonably 
interfere with or endanger operations under this lease; and
    (d) suspending operations under this lease during war or 
national emergency as provided in section 12(c) or 12(d) of the Act. 
If the Lessor suspends operations or restricts activities under 
those sections of the Act, rent and royalty payments will be 
suspended and the term of this lease will be extended by adding the 
suspension period. The Lessor will pay the Lessee just compensation 
for such suspension as provided by the Act.
    Section. 7. Payment of Rent and Royalty. The Lessee must pay the 
rent, minimum royalty, or royalty on the value of production saved, 
removed or sold at the rate specified on the face of this lease. The 
Lessor may require payment of the royalty in kind.

[[Page 60383]]

Payment must comply with applicable regulations and the following 
provisions:
    (a) The Lessee must pay rent for each lease year which begins 
before determination of oil or gas in paying quantities in the 
leased area. Rent for the first year is due by the eleventh business 
day after receipt of this lease, and for subsequent years on or 
before the anniversary date of this lease.
    (b) The Lessee must pay minimum royalty for each year which 
begins after a determination of oil or gas in paying quantities on 
the lease area is made by the Lessor. Minimum royalty is due by the 
day before the next anniversary of the lease. If production occurs, 
the Lessee must pay the greater of minimum royalty or royalty.
    (c) The Lessor reserves authority to establish reasonable value 
of all production for royalty purposes. To establish the value of 
production, the Lessor may use dispositions by the Lessee, its 
affiliates, and others related to the Lessee, or the Lessor may use 
other considerations specified under applicable regulations.
    (d) The Lessee must place production in marketable condition and 
market the production at no cost to the Lessor.
    (e) The Lessee shall deliver royalty oil and gas resources taken 
in kind to a delivery point designated by the Lessor.
    Sec. 8. Diligent Operations. The Lessee must properly and timely 
develop and produce this lease. Under normal conditions, the Lessee 
will explore and commence development within the primary term of 
this lease. After due notice in writing from the Lessor, the Lessee 
must drill such wells and produce at such rates consistent with 
sound operating principles as the Lessor may require.
    Sec. 9. Removal of Property on Termination of Lease. In 
accordance with regulations, the Lessee must submit for approval a 
plan for well abandonment and platform decommissioning within three 
months after termination in whole or in part unless the Lessor 
approves a longer period. The Lessee must provide for the removal of 
all devices, works, and structures from the premises no longer 
subject to the lease, according to applicable regulations and orders 
of the Lessor. All abandonment and removal operations must be 
completed within one year after termination of this lease unless 
otherwise approved by the Lessor. Failure to comply will result in 
penalties under the regulations. The Lessor may take title to any 
property not removed within such time. With the written approval of 
the Lessor under a right of use and easement, the Lessee may 
continue to maintain devices, works, and structures on the leased 
area for drilling or producing on other leases or for other 
purposes.
    Sec. 10. Remedies for Less Non-Compliance.
    (a) Whenever the Lessee fails to comply with any provisions of 
the Act, the regulations issued under the Act, or the terms of this 
lease, the Lessor's remedies include, but are not limited to:
    (1) Penalties under section 24 of the Act;
    (2) Suspension or cancellation under Section 5 of the Act;
    (3) Demands for payment or forfeiture of bond; or
    (4) Other remedies for nonperformance of a contract available 
under common law or statutes.
    (b) The Lessor's nonenforcement of a remedy for any violation 
does not prevent the Lessor from exercising any other remedies for 
any other violation or from exercising any other remedies for the 
same violation occurring at any other time.

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(Lessee)

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(Signature of Authorized Officer)

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(Name of Signatory)

----------------------------------------------------------------------
(Title)

----------------------------------------------------------------------
(Date)

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(Address of Lessee)

The United States of America, Lessor

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(Signature of Authorized Officer)

----------------------------------------------------------------------
(Name of Signatory)

----------------------------------------------------------------------
(Title)

----------------------------------------------------------------------
(Date)

    If this lease is executed by a corporation, it must bear the 
corporate seal.

    Dated: November 2, 1998.
Cynthia Quarterman,
Director.
[FR Doc. 98-29914 Filed 11-6-98; 8:45 am]
BILLING CODE 4310-MR-M