[Federal Register Volume 64, Number 27 (Wednesday, February 10, 1999)]
[Proposed Rules]
[Pages 6586-6588]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-3174]


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DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 227

RIN 1010-AC51


Change to Delegated State Audit Functions

AGENCY: Minerals Management Service, Interior.

ACTION: Proposed rule.

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SUMMARY: The Minerals Management Service (MMS) is proposing to amend 
its regulation at 30 CFR 227.101, to allow States which choose to 
assume audit duties to do so for less than all of the Federal mineral 
leases within the State or leases offshore of the State, subject to 
section 8(g), of the Outer Continental Shelf Lands Act, 43 U.S.C. 
1337(g).

DATES: Comments must be submitted on or before April 12, 1999.

ADDRESSES: If you wish to comment, you may submit your comments any one 
of several methods. You may mail comments to David S. Guzy, Chief, 
Rules and Publications Staff, Minerals Management Service, Royalty 
Management Program, P.O. Box 25165, MS 3021, Denver, CO 80225-0165. 
Courier or overnight delivery address is Building 85, Room A-613, 
Denver Federal Center, Denver, CO 80225. You may also comment via the 
Internet to RMP.[email protected]. Please submit Internet comments as an 
ASCII file avoiding the use of special characters and any form of 
encryption. Please also include ``Attn: RIN 1010-AC51'' and your name 
and return address in your Internet message. If you do not receive a 
confirmation from the system that we have received your Internet 
message, contact David S. Guzy directly at (303) 231-3432.

FOR FURTHER INFORMATION CONTACT: David S. Guzy, Chief, Rules and 
Publications Staff, telephone (303) 231-3432, FAX (303) 231-3385, e-
Mail David.G[email protected].

SUPPLEMENTARY INFORMATION: The principal author of this proposed 
rulemaking is Ms. Shirley Burhop, State and Indian Compliance Division, 
Royalty Management Program (RMP).
    We will post public comments after the comment period closes on the 
Internet at http://www.rmp.mms.gov. You may arrange to view paper 
copies of the comments by contacting David S. Guzy, Chief, Rules and 
Publications Staff, telephone (303) 231-3432, FAX (303) 231-3385. Our 
practice is to make comments, including names and home addresses of 
respondents, available for public review during regular business hours. 
Individual respondents may request that we withhold their home address 
from the rulemaking record, which we will honor to the extent allowable 
by law. There also may be circumstances in which we would withhold from 
the rulemaking record a respondent's identity as allowable by law. If 
you wish us to withhold your name or address, you must state this 
prominently at the beginning of your comment. However, we will not 
consider anonymous comments. We will make all submissions from 
organizations or businesses, and from individuals identifying 
themselves as representatives or officials of organizations or 
businesses, available for public inspection in their entirety.

I. Background

    This proposed rule will amend regulations governing the delegation 
of royalty management duties to States. Section 205 of the Federal Oil 
and Gas Royalty Management Act of 1982 (FOGRMA), 30 U.S.C. 1735, gives 
MMS the authority to delegate audit functions to States. Currently, 10 
States have entered into the cooperative agreements authorized by 
Section 205.
    Regulations in 30 CFR part 227 implementing the Federal Oil and Gas 
Royalty Simplification and Fairness Act of 1996 (RSFA), Pub. L. 104-
185, as corrected by Pub. L. 104-200, expanded upon the delegation of 
duties that States could assume. Those regulations at 30 CFR 227.101 
inserted the term ``all'' into the description of Federal mineral 
leases subject to audit, thereby requiring that States audit all 
Federal mineral leases within that State and all 8(g) leases offshore 
of the State in order to enter into a cooperative agreement to assume 
the audit function. The word ``all'' was, in fact, intended in the case 
of the other delegable functions authorized by RSFA, but does not seem 
to be either necessary or desirable in the case of the audit function.
    This change is necessary in order for States, which are now 
delegated audit authority under FOGRMA, to continue that audit 
authority without significantly altering their staffing, funding, or 
other operations.
    By removing the requirement that they exercise audit authority over 
all Federal mineral leases within the State, the States will again be 
able to work with us in those cases where State resources do not allow 
the State to sufficiently cover their entire audit universe. Thus, the 
State would designate the limits of its audit activity each year 
through an annual audit work plan. This wording change would also 
enable the MMS to continue to assist a State in its audit efforts when 
necessary.

II. Statutory Authority

    Authority for this change is granted by FOGRMA, 30 U.S.C. 1735, as 
amended by RSFA, Pub. L. 104-185, August 13, 1996, as corrected by Pub. 
L. 104-200. Authority regarding solid mineral leases, geothermal 
leases, and 8(g) leases is granted by Pub. L. 102-154.

III. Analysis

    The requirement that a State audit all Federal and 8(g) leases 
within/offshore of that State is only stated in 30 CFR 227.101. It is 
not required by law. RSFA, Sec. 3, FOGRMA Sec. 205, states ``Upon 
written request of any State, the Secretary is authorized to delegate * 
* * all or part of the authorities and responsibilities of the 
Secretary * * * to any State with respect to all Federal land within 
the State.''
    The only way to negate the effect of the rule is to write a new 
rule which changes the requirement to audit all leases.
    This solution will be cost neutral. States which are delegated 
audit duties will continue to be fully reimbursed in accordance with 
their annual, approved audit plan for their costs. This solution will 
enable those States which currently are delegated audit duties to 
continue to perform that delegated function, in spite

[[Page 6587]]

of staffing, funding, or other limitations. It will enable other States 
which might desire to take on the delegated audit function to do so 
without being fully staffed to the extent necessary were they required 
to audit all Federal mineral and 8(g) leases in or offshore of that 
State.

IV. Procedural Matters

Regulatory Planning and Review (E.O. 12866)

    This document is not a significant rule and is not subject to 
review by the Office of Management and Budget under Executive Order 
12866.
    (1) This rule will not have an effect of $100 million or more on 
the economy. It will not adversely affect in a material way the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities. Requesting States may incur additional costs for 
delegation responsibilities. However, these direct costs will be fully 
reimbursed by the Federal Government in accordance with their annual, 
approved audit plan each year. This rule change does not require any 
additional information or fees to be filed by the States.
    (2) This rule will not create a serious inconsistency or otherwise 
interfere with an action taken or planned by another agency. The 
States' delegated audit authority will follow the policies of the 
Department. State actions will be coordinated with the Bureau of Land 
Management and MMS.
    (3) This rule does not alter the budgetary effects or entitlements, 
grants, user fees, or loan programs or the rights or obligations of 
their recipients. Audits of Federal leases within State boundaries will 
be individually budgeted through an annual work plan proposal prepared 
by the State and approved by MMS. This is a process which has been used 
effectively since 1985 and will continue under the proposed rule.
    (4) This rule does not raise novel legal or policy issues. The 
authority to delegate audit duties to States has been available to MMS 
since 1983. The operational history has been one where the States 
covered as much of the Federal lease universe as practical for each 
State and MMS covered the remainder. We expect these circumstances of 
operation to continue under the proposed rule.

Regulatory Flexibility Act

    The Department of the Interior certifies that this document will 
not have a significant economic effect on a substantial number of small 
entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).
    The major impact of the rule will be on State governments, which 
are not small entities. There will be some effect on the oil and gas 
companies which are subject to audit, as various audit staffs, 
including MMS's Compliance Divisions, State delegations, and Indian 
Tribal delegations, may now audit Federal and Indian leases located 
within a particular State's boundaries. This is no change from the way 
in which MMS and delegated States and Tribes have audited companies in 
the past, prior to the passage of RSFA. As has been done in the past, 
MMS will continue to coordinate audit efforts of the various entities 
which might be involved in any particular audit in order to minimize 
disruptions to the companies being audited.

Small Business Regulatory Enforcement Fairness Act (SBREFA)

    This rule is not a major rule under 5 U.S.C. 804(2), the Small 
Business Regulatory Enforcement Fairness Act. This rule:
    a. Does not have an annual effect on the economy of $100 million or 
more. The expense of delegated audit functions would be initially 
incurred by the States and later reimbursed by MMS. The maximum 
economic impact for audit delegation is estimated to be $5.5 million.
    b. Will not cause a major increase in costs or prices for 
consumers, individual industries, Federal, State, or local government 
agencies, or geographic regions. The audit of Federal leases is not a 
function which generates impacts on costs or prices to individuals or 
areas. States will be reviewing royalty calculation and payments to 
enforce existing Federal lease terms and royalty policies. States will 
conduct the audits as efficiently and economically as possible in 
accordance with State and Departmental policies.
    c. Does not have significant adverse effects on competition, 
employment, investment, productivity, innovation, or the ability of 
U.S.-based enterprises to compete with foreign-based enterprises. The 
laws providing for the delegation of audit duties, FOGRMA and RSFA, do 
not provide for any other entity, except tribal governments, to conduct 
these duties.
    Your comments are important. The Small Business and Agriculture 
Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards were 
established to receive comments from small businesses about Federal 
agency enforcement actions. The Ombudsman will annually evaluate the 
enforcement activities and rate each agency's responsiveness to small 
business. If you wish to comment on the enforcement actions in this 
proposed rule, call 1-888-734-3247.

Unfunded Mandates Reform Act of 1995

    This rule does not impose an unfunded mandate on State, local, or 
tribal governments or the private sector of more than $100 million per 
year. The rule does not have a significant or unique effect on State, 
local or tribal governments or the private sector. The rule does not 
change valuation requirements, impose additional royalty collections or 
require new reporting forms. This rule merely gives State governments 
the option to conduct audits and investigations on less than all of the 
Federal mineral leases within State boundaries. The costs incurred to 
conduct the audits and investigations will be fully reimbursed by the 
Federal Government in accordance with the State's annual, approved 
audit plan. We expect those costs to be no more than $5.5 million per 
year. County, local, or tribal governments will not perform the 
delegable audit functions on behalf of State governments; therefore, 
they will not be impacted by this rule.
    A statement containing the information required by the Unfunded 
Mandates Reform Act (2 U.S.C. 1531 et seq.) is not required.

Takings (E.O. 12630)

    In accordance with Executive Order 12630, the rule does not have a 
significant takings implication. States seeking audit delegation from 
year to year will propose the level of effort they can expend auditing 
Federal leases. This method of operation will give States first choice 
in cooperatively planning annual work with MMS. This rule does not 
represent a governmental action capable of interference with 
constitutionally protected property rights. A takings implication 
assessment is not required.

Federalism (E.O. 12612)

    In accordance with Executive Order 12612, the rule does not have 
sufficient federalism implications to warrant the preparation of a 
Federalism Assessment. This rule allows States to continue to audit 
selected leases within legal boundaries. It does not alter roles, 
rights or responsibilities of States conducting delegated audits. A 
Federalism Assessment is not required.

Civil Justice Reform (E.O. 12988)

    In accordance with Executive Order 12988, the Office of the 
Solicitor has

[[Page 6588]]

determined that this rule does not unduly burden the judicial system 
and meets the requirements of sections 3(a) and 3(b)(2) of the Order.

Paperwork Reduction Act

    This regulation does not require an additional information 
collection approval under the Paperwork Reduction Act of 1995. There is 
currently in place an approved information collection titled Delegation 
of Authority to States, OMB Control Number 1010-0088, which expires on 
June 30, 2000.

National Environmental Policy Act of 1969

    This rule does not constitute a major Federal action significantly 
affecting the quality of the human environment. A detailed statement 
under the National Environmental Policy Act of 1969 is not required.

Clarity of This Regulation

    Executive Order 12866 requires each agency to write regulations 
that are easy to understand. We invite your comments on how to make 
this rule easier to understand, including answers to questions such as 
the following:
    (1) Are the requirements in the rule clearly stated?
    (2) Does the rule contain technical language or jargon that 
interferes with its clarity?
    (3) Does the format of the rule (grouping and order of sections, 
use of headings, paragraphing, etc.) aid or reduce its clarity?
    (4) Would the rule be easier to understand if it were divided into 
more (but shorter) sections? (A ``section'' appears in bold type and is 
proceeded by the symbol ``Sec. '' and a number heading; for example:

Sec. 227.101  What Royalty Management functions may MMS delegate to a 
State?

    (5) Is the description of the rule in the ``Supplementary 
Information'' section of this preamble helpful in understanding the 
rule?
    (6) What else could we do to make the rule easier to understand?
    Send a copy of any comments that concern how we could make this 
rule easier to understand to: Office of Regulatory Affairs, Department 
of the Interior, Room 7229, 1849 C Street NW, Washington, DC 20240. You 
may also E-mail your comments to this address: E[email protected].

List of subjects in 30 CFR Part 227

    Coal, Continental shelf, Geothermal energy, Government contracts, 
Mineral royalties, Natural gas, Petroleum, Public lands--mineral 
resources, Reporting and recordkeeping requirements.

    Dated: January 26, 1999.
Sylvia V. Baca,
Acting Assistant Secretary, Land and Minerals Management.
    For the reasons set out in the preamble, 30 CFR part 227 is 
proposed to be amended as follows:

PART 227--DELEGATION TO STATES

    1. The authority citation for part 227 continues to read as 
follows:

    Authority: 30 U.S.C. 1735; 30 U.S.C. 196; Pub. L. 102-154.

    2. Revise Sec. 227.101 to read as follows:


227.101  What royalty management functions may MMS delegate to a State?

    (a) If there are oil and gas leases subject to the Act on Federal 
lands within your State, MMS may delegate the following royalty 
management functions for all such Federal oil and gas leases to you 
under this part:
    (1) Receiving and processing production or royalty reports;
    (2) Correcting erroneous report data; and
    (3) Performing automated verification.
    (b) If there are oil and gas leases subject to the Act on Federal 
lands within your State, MMS may delegate the following royalty 
management functions for some or all of the Federal oil and gas leases 
to you under this part:
    (1) Conducting audits and investigations; and
    (2) Issuing demands, subpoenas, and orders to perform restructured 
accounting, including related notices to lessees or their designees, 
and entering into tolling agreements under section 115(d)(1) of the 
Act, 30 U.S.C. 1725(d)(1).
    (c) If there are oil and gas leases offshore of your State subject 
to section 8(g) of the Outer Continental Shelf Lands Act, 43 U.S.C. 
1337 (g), or solid mineral leases or geothermal leases on Federal lands 
within your State, MMS only may delegate authority to conduct audits 
and investigations for some or all such Federal leases.

[FR Doc. 99-3174 Filed 2-9-99; 8:45 am]
BILLING CODE 4310-MR-P