[Federal Register Volume 63, Number 238 (Friday, December 11, 1998)]
[Notices]
[Page 68472]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32949]



[[Page 68472]]

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DEPARTMENT OF THE INTERIOR

Minerals Management Service


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

AGENCY: Minerals Management Service, DOI.

ACTION: Notice of Information Collection Solicitation.

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SUMMARY: Under the Paperwork Reduction Act of 1995, the Minerals 
Management Service (MMS) is soliciting comments on an information 
collection, Net Profit Share Leases (OMB Control Number 1010-0073), 
which expires on May 31, 1999.

FORM: None.

DATES: Written comments should be received on or before February 9, 
1999.

ADDRESSES: Comments sent via the U.S. Postal Service should be sent to 
Minerals Management Service, Royalty Management Program, Rules and 
Publications Staff, P.O. Box 25165, MS 3021, Denver, Colorado 80225-
0165; courier address is Building 85, Room A613, Denver Federal Center, 
Denver, Colorado 80225; e:mail address is RMP.[email protected].

FOR FURTHER INFORMATION CONTACT: Dennis C. Jones, Rules and 
Publications Staff, phone (303) 231-3046, FAX (303) 231-3385, e-mail 
Dennis.C.J[email protected].

SUPPLEMENTARY INFORMATION: In compliance with the Paperwork Reduction 
Act of 1995, Section 3506 (c)(2)(A), we are notifying you, members of 
the public and affected agencies, of this collection of information 
which expires May 31, 1999. We are requesting OMB approval for a three 
year extension of this existing collection authority. Is this 
information collection necessary for us to properly do our job? Have we 
accurately estimated the industry burden for responding to this 
collection? Can we enhance the quality, utility, and clarity of the 
information we collect? Can we lessen the burden of this information 
collection on the respondents by using automated collection techniques 
or other forms of information technology?
    To encourage exploration and development of oil and gas leases on 
submerged lands of the Outer Continental Shelf (OCS), regulations were 
promulgated at 30 CFR 260.110(4) implementing a net profit share 
bidding system. The Net Profit Share Lease (NPSL) bidding system was 
established to properly balance a fair market return to the Federal 
Government for the lease of its lands, with a fair profit to companies 
risking their investment capital. The system provides an incentive for 
early and expeditious exploration and development, and provides for a 
sharing of the risks by the lessee and the Government. The bidding 
system incorporates a fixed capital recovery system as the means 
through which the lessee recovers costs of exploration and development 
from production revenues, along with a reasonable return on investment.
    The Government does not receive a profit share payment from an NPSL 
until the lessee shows a credit balance in its capital account; that 
is, cumulative revenues and other credits exceed cumulative costs. The 
credit balance is multiplied by the net profit share rate (usually 
50%), resulting in the amount of profit share (royalty) due. The lessee 
is able to recover exploration and development expenses, plus a 
reasonable return on its investment, prior to payment of any royalty to 
the Government.
    Lessees are required (30 CFR 220.010) to maintain an NPSL capital 
account and to provide annual and monthly reports using data taken from 
the capital account (30 CFR 220.031). This collection of information is 
necessary in order to determine when royalty payments are due, and to 
determine the proper amount of payment.
    The Department of the Interior (DOI) is the department within the 
Federal Government responsible for matters relevant to mineral resource 
development on the OCS. The Secretary of the Interior (Secretary) is 
responsible for managing the production of minerals from Federal and 
Indian Lands and the OCS; for collecting royalties from lessees who 
produce minerals; and for distributing the funds collected in 
accordance with applicable laws. The Minerals Management Service (MMS) 
performs the royalty management functions for the Secretary.
    Under the NPSL bidding system, a notice of OCS lease sale is 
published in the Federal Register with a net profit share rate and a 
capital recovery factor (CRF) established for each tract within the 
sale. The CRF allows the lessee to inflate certain allowable costs by 
multiplying costs by the CRF. This additional allowance results in a 
type of risk-sharing arrangement with the Government. Tracts within the 
same sale may have different profit share rates and different CRF's. 
The last OCS lease sale involving NPSL's was in August 1983.
    After entering into a lease agreement, the lessee is required to 
maintain an NPSL capital account (30 CFR 220.010). The capital account 
balance represents the cumulative total of all costs and credits 
received over the life of the lease. Once the account balance reaches 
zero, or the lease becomes profitable, royalty payments are due.
    When companies enter into NPSL agreements, they agree to submit the 
reports required by 30 CFR 220.031. There are no reporting forms 
required, but the lessees must submit updates containing specific 
information. Before production begins, reports are required on an 
annual basis. These reports must document costs incurred, credits 
received, and the balance in the NPSL capital account. Once production 
begins, monthly reports are required that include the amount and 
disposition of oil and gas saved, removed, or sold; the amount of 
production revenue; the amount and description of costs and credits to 
the NPSL capital account; the balance in the capital account; the net 
profit share base and net profit share payment due the Government; and 
the lessee's monthly profit share. All information submitted is taken 
directly from the lessee's own records. No unique information is 
required by MMS.
    Royalty payments are made based on the individual lease's net 
profit share rate, multiplied by the quantity (revenues and other 
credits, less costs). MMS uses the data submitted in the annual and 
monthly reports to verify costs claimed, revenues earned, and royalty 
payments due. No royalties are paid until the lessee recovers 
exploration and development expenses. Information provided in the 
reports is used by MMS auditors. Failure of the respondent to submit 
the information results in noncompliance with the requirements of 30 
CFR 220 and could result in loss of royalty payments to the Government.
    We estimate that about 16 hours are required to prepare each annual 
and monthly lease report in order to extract from company records the 
data required by 30 CFR 220.031. Information required to complete these 
reports comes from records maintained by the companies for their own 
use. One additional hour for recordkeeping may be required as companies 
set up files for each lease.

    Dated: December 3, 1998.
Lucy Querques Denett,
Associate Director for Royalty Management.
[FR Doc. 98-32949 Filed 12-10-98; 8:45 am]
BILLING CODE 4310-MR-P