[Federal Register Volume 63, Number 236 (Wednesday, December 9, 1998)]
[Notices]
[Pages 67915-67916]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32580]


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DEPARTMENT OF THE INTERIOR

Minerals Management Service


Agency Information Collection Activities: Submitted for Office of 
Management and Budget Review; Comment Reguest

TITLE: Solicitation for Comments: Royalty-in-Kind (RIK) Determination 
of Need.

SUMMARY: The Minerals Management Service (MMS), an agency of the U.S. 
Department of the Interior, is requesting written comments from 
interested parties--particularly from small and/or independent 
petroleum refiners--regarding their experiences in the crude oil 
marketplace. Specifically, we are interested in small and/or 
independent refiners' experiences in gaining access to adequate 
supplies of crude oil at equitable prices. This Determination of Need 
process will assist the Secretary of the Interior in deciding whether 
or not to conduct a sale(s) of Federal Government royalty oil under the 
Royalty-In-Kind (RIK) program.

DATES: Responses must be submitted on or before January 25, 1999.

ADDRESSES: Responses sent via the U.S. Postal Service should be sent to 
Tom Brozovich, Accounting and Reports Division, Minerals Management 
Service, Royalty Management Program, P.O. Box 25165, MS 3131, Denver, 
Colorado 80225-0165; courier address is Building 85, Room B513, Denver 
Federal Center, Denver, Colorado 80225; e-mail address is 
[email protected].

FOR FURTHER INFORMATION CONTACT: Tom Brozovich, Accounting and Reports 
Division, phone 303-231-3351, FAX 303-231-3711, e-mail 
[email protected].

Background Information

    Under the provisions of the Mineral Leasing Act of 1920 (MLA), as 
amended (30 U.S.C. Sec. 192), and the Outer Continental Shelf Lands Act 
(OCSLA) of August 7, 1953, as amended (43 U.S.C. Sec. 1334, 1353), the 
Secretary of the Interior can take Federal royalty oil in kind, in lieu 
of royalty payment, and sell it to ``eligible refiners'' for use in 
their refineries. The oil RIK program is governed by the regulations at 
30 CFR 208, effective December 1, 1987, (52 FR 41908, 10/30/1987).
    An ``eligible refiner,'' as defined at 30 CFR Sec. 208.2, means a 
refiner of crude oil meeting the following criteria to purchase royalty 
oil:
    (1) For the purchase of royalty oil from onshore leases, it means a 
refiner that has an operating refinery and qualifies as a small and 
independent refiner as those terms are defined in Sections 3(3) and 
3(4) of the Emergency Petroleum Allocation Act, 15 U.S.C. 751 et seq. A 
refiner that, together with all persons controlled by, in control of, 
under common control with, or otherwise affiliated with the refiner, 
inputs domestic crude oil from its own production exceeding 30 percent 
of total refinery input is ineligible to participate in royalty sales 
under this part. (In other words, to be eligible under this part, the 
refiner must receive at least 70 percent of his feeder stock from 
unaffiliated sources.) Crude oil received in exchange for the refiner's 
own production is considered to be part of that refiner's own 
production for purposes of this section.
    (2) For the purchase of royalty oil from offshore leases, it means 
a refiner that has an operating refinery and qualifies as a small 
business enterprise under the rules of the Small Business 
Administration (SBA) (13 CFR Part 121). The SBA standard for a small 
business within the Petroleum Refining Industry is less than or equal 
to 75,000 bbl per day, and less than or equal to 1,500 employees.
    The regulation at 30 CFR Sec. 208.4(a) governs the Determination of 
Need process and states that:

    The Secretary may evaluate crude oil market conditions from time 
to time. The evaluation will include, among other things, the 
availability of crude oil and the crude oil requirements of the 
Federal Government, primarily those requirements concerning matters 
of national interest and defense. The Secretary will review these 
items and will determine whether eligible refiners have access to 
adequate supplies of crude oil and whether such oil is available to 
eligible refiners at equitable prices. Such determinations may be 
made on a regional basis * * *.

    Given that existing RIK contracts (involving Gulf of Mexico and 
Pacific Region offshore leases) expire May 1, 1999, MMS has concluded 
that a Determination of Need would be most beneficial in any decision 
to hold future royalty oil sales.

SUPPLEMENTARY INFORMATION: While the RIK program has been an important 
source of crude oil for many refiners over the years, it has not been 
without its problems. From its heyday in the late 1970's and early to 
mid 1980's, the program has declined from over 60 active contracts 
(both onshore and offshore) to the current total of only six offshore 
contracts. Many factors have contributed to the diminished 
participation, including the following:
     The surplus of crude oil supplies on both the 
international and domestic markets, which has made it easier for small 
refiners to purchase the oil they need to run their refineries without 
having to rely on Federal royalty oil; and
     Complexities of the current program, which has been 
characterized as having burdensome reporting and administrative 
requirements and valuation uncertainty.
    MMS has completed a study of the oil RIK program and is conducting 
a pilot (Eligible Refiner Oil RIK Pilot, OMB Control Number 1010-0109) 
to check the results of that study. The pilot is reviewing reporting 
and delivery issues symptomatic of the current program. This effort 
should be completed by the end of calendar year 1998, with formal 
recommendations for streamlining the program to be submitted to the 
Director, MMS, in early 1999. While it's premature to predict the exact 
nature or scope of forthcoming program changes, it's not unreasonable 
to expect:
     Changes to current regulations affording greater clarity 
and logical business practice in the areas of administrative fees, 
transportation allowances, operator delivery requirements, resolution 
of delivery imbalances and gravity bank adjustments, etc.; and
     Greater specificity and certainty with regard to RIK 
contract language, especially with regard to provisions addressing the 
valuation of RIK oil for billing purposes.
    Consequently, the current program could undergo dramatic changes in 
the

[[Page 67916]]

near future as various pilot efforts reach maturity and resulting 
recommendations are implemented.
    Potential respondents should also note that the mere conduct of a 
Determination of Need in no way presupposes that there will or will not 
be a subsequent RIK sale(s). A Determination of Need is a logical first 
step in identifying general marketplace conditions. However, any 
decision to conduct an RIK sale(s) will necessarily be predicated on 
the regulatory criteria of ``access'' and ``equity''--i.e., whether a 
significant number of refiners have limited or no access to the 
marketplace and/or have experienced difficulty in negotiating a fair 
price for feeder stocks.

Information Requested

    To assist MMS in completing a Determination of Need, please respond 
in writing or electronically to the following questions:
    (1) How would you describe your business activity--small/
independent refiner, other refiner, producer, transporter, etc.?
    (2) For your immediate region or geographic area of operation, how 
would you characterize the general availability of crude oil?
    (3) Do you currently own or lease an operating refinery? If so, 
where is it located?
    (4) Is your refinery operating at full or near-full capacity? If 
not, why not?
    (5) Do you meet the RIK program eligibility criteria previously 
noted for onshore or offshore leases, or both?
    (6) What percentage of onshore versus offshore crude oil volumes 
are currently being run through your refinery?
    (7) What type of crude is desired to sustain your mix of refined 
products--Wyoming Sweet, Wyoming Sour, Light Louisiana Sweet, etc.?
    (8) Have you been denied access to crude oil supplies in the past 
12 to 18 months? What was the basis for the denial? For example, was 
the denial attributable to unavailability of desired crude, a lack of 
access to the transportation pipeline, or other reasons? Please provide 
documentation supporting any claim of denial.
    (9) Do you use exchange agreements? Why?
    (10) Are the feeder stocks you purchase priced above market values 
for your geographic area? In other words, do you pay a bonus or premium 
because of your status as a small and/or independent refiner? Please 
identify, by crude oil type, what you pay on the average per barrel of 
oil.
    (11) Have you previously participated in the Federal royalty oil 
program? If a prior program participant, why did you leave the program? 
How would you now benefit from receiving Federal royalty oil?
    (12) Do you currently provide refined products (heating oil, jet 
fuel, etc.) to a U.S. military base or Federal installation? If so, 
identify the recipient facility and how long you have been supplying 
refined products.
    (13) Do you anticipate any near term developments that would change 
your access to necessary supplies of crude oil at equitable prices?
    All correspondence, records, or information received in response to 
this Notice, and specifically in response to the questions listed 
above, are subject to disclosure under the Freedom of Information Act. 
All information provided will be made public unless the respondent 
identifies which portions are proprietary. Please highlight the 
proprietary portions, including any supporting documentation, or mark 
the page(s) that contain proprietary data.
    The Paperwork Reduction Act of 1995 requires us to inform you that 
this information is being collected by MMS under an approved 
information collection titled Royalty-in-Kind (RIK) Determination of 
Need, OMB Control Number 1010-0119. We estimate the burden for 
responding to this information collection 4 hours. Comments on the 
accuracy of this burden estimate or suggestions on reducing this burden 
should be directed to the Information Collection Clearance Officer, MS-
4230, MMS, 1849 C Street, N.W., Washington, DC 20240 and to the Office 
of Management and Budget, Office of Information and Regulatory Affairs, 
Attention: Desk Officer for the U.S. Department of the Interior (OMB 
Control Number 1010-0119), Washington, DC 20503. Proprietary 
information is protected by the Federal Oil and Gas Royalty Management 
Act of 1982 (30 U.S.C. 1733), the Freedom of Information Act (5 U.S.C. 
552 (b)(4), the Indian Minerals Development Act of 1982 (25 U.S.C. 
2103) and Department regulations (43 CFR 2). 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.

    Dated: December 2, 1998.
Lucy Querques Denett,
Associate Director for Royalty Management.
[FR Doc. 98-32580 Filed 12-8-98; 8:45 am]
BILLING CODE 4310-MR-P