[Federal Register Volume 64, Number 144 (Wednesday, July 28, 1999)]
[Rules and Regulations]
[Pages 40764-40767]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19262]


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DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 256

RIN 1010-AC49


Leasing of Sulphur or Oil and Gas in the Outer Continental 
Shelf--Bonus Payments With Bids

AGENCY: Minerals Management Service (MMS), Interior.

ACTION: Final rule.

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SUMMARY: This rule gives MMS the authority to require Federal offshore 
Outer Continental Shelf (OCS) lands lease bidders to use any single 
method for submitting \1/5\ bonus payments with OCS bids.

EFFECTIVE DATE: The rule is effective August 27, 1999.

FOR FURTHER INFORMATION CONTACT: Jan Arbegast, Program Analyst, at 
(703) 787-1227.

SUPPLEMENTARY INFORMATION: On March 31, 1999, we published a Notice of 
Proposed Rulemaking (64 FR 15320), titled ``Leasing of Sulphur or Oil 
and Gas in the Outer Continental Shelf--Bonus Payments with Bids,'' 
revising 30 CFR 256.46(b). Our 30-day comment period closed on April 
30, 1999. We received four comments. This final rule

[[Page 40765]]

amends the regulation at 30 CFR 256.46(b).
    Since the mid-1950s, the Federal Government has received bonus bid 
payments to acquire leases offered at OCS lease sales. Prospective 
bidders submit the required \1/5\ bonus payment in the form of a check 
or bank draft, which accompanies a sealed bid on a specific offshore 
tract of submerged land. Since August 1997, we have offered prospective 
bidders the option of using electronic funds transfer (EFT) to submit 
their \1/5\ bonus payment rather than a check or bank draft. As 
technology has progressed and as banking transactions become routinely 
automated, we need to have in place a rule that allows us to require 
automated payment such as EFT or other methods that may be more 
efficient. This revision allows flexibility so that we can require the 
specific method of bonus payment that is most efficient and 
administratively advantageous to the Government and industry.

Comments on the Rule

    We received comments from Pogo Producing Company, Murphy 
Exploration & Production Company, Texaco Exploration and Production, 
Inc., and the American Petroleum Institute. Generally, those who 
commented favored EFT as a method of submitting the \1/5\ bonus bid 
amount.

Comments and Responses to Issues

     Comment: Concerning timing of the \1/5\ bonus payment, 
prefer payment by the apparent high bidder on the day following the 
sale (as currently done) rather than a prepayment on or before the day 
of the sale.
    Response: At this time, we have no plans to change the timing of 
the EFT bonus payment.
     Comment: The mandated use of EFT could cause problems for 
some companies under some circumstances. Request that MMS maintain 
highest level of confidentiality of bids and address any potential 
transmission and receipt problems.
    Response: Regarding confidentiality, the bid submission process has 
not changed. The EFT transaction is completed only after public bid 
opening. A bidder needs only to complete one EFT transaction for all of 
its high bids instead of submitting separate cashier's checks for each 
bid. For a few companies, there may be initial start-up costs and 
problems, but the benefit to the Government and long-term benefit to 
the bidder outweigh any initial problems. We have used EFT as an 
optional method of bid submission in the last four Gulf of Mexico (GOM) 
OCS lease sales (since August 1997). Companies of various sizes have 
bid via EFT. The EFT transaction system has worked very efficiently 
with administrative savings for both bidders and the Government. In the 
two most recent GOM lease sales, over 90 percent of the \1/5\ high 
bonus bid amounts were transmitted via EFT. The MMS continues to treat 
all submitted bids with appropriate security and will continue to 
assist bidders who experience any transmission problems.
     Comment: Because all companies may not find EFT convenient 
or always possible, EFT should remain an option for such payments.
    Response: The final rule gives MMS the flexibility to specify the 
method of payment for bonus bids in the notice of sale. The MMS will 
carefully monitor each sale and will determine which method(s) of 
payment for bid submission is most advantageous to both the Government 
and industry for that particular sale. In certain circumstances, having 
EFT as a \1/5\ bonus bid submission option may be desirable. However, 
maintaining EFT \1/5\ bonus bid submission as an optional form of 
payment negates much of the administrative savings to the Government 
since a separate process and infrastructure must be in place to accept 
paper transactions. Eliminating this paper transaction process produces 
most of the cost savings to the Government.
     Comment: MMS should codify general guidelines for EFT 
payments in the regulations rather than publish them in each notice of 
sale.
    Response: The MMS believes that the proposed and final sale notice 
packages are better vehicles for detailed administrative guidance for 
submitting bids via EFT or for other bid submission guidance, which may 
change as technology and business practices evolve.

Procedural Matters

Federalism (Executive Order (E.O.) 12612)

    According to E.O. 12612, the rule does not have significant 
Federalism implications. A Federalism assessment is not required.

Takings Implications Assessment (E.O. 12630)

    According to E.O. 12630, the rule does not have significant Takings 
Implications. A Takings Implication Assessment is not required.

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 E.O. 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.
    Ultimately, this rule is administratively advantageous to 
prospective bidders on the OCS. It will save time and administrative 
burden in their bid-preparation paperwork process and will also use 
current technology, improving efficiency both for industry and the 
Government.
    (2) This rule will not create a serious inconsistency or otherwise 
interfere with an action taken or planned by another agency. Using EFT 
is common practice in private industry. Through the use of electronic 
commerce, we reduce the number of transactions required by bidders. A 
bidder can initiate one EFT transaction for all of its high bids rather 
than individual checks for each high bid. This does not interfere with 
other agencies' actions.
    (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. This rule has no effect on these programs or rights 
of the programs' recipients.
    (4) This rule does not raise novel legal or policy issues. As 
previously stated, the intent of this rule is to give the Government 
flexibility in requiring a specific form of bonus payment, including 
EFT. It is commonplace in private industry and creates no novel policy 
issues.

Civil Justice Reform (E.O. 12988)

    According to E.O. 12988, the Office of the Solicitor has determined 
that this rule does not unduly burden the judicial system and meets the 
requirements of Secs. 3(a) and 3(b)(2) of the Order.

National Environmental Policy Act (NEPA)

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

Paperwork Reduction Act (PRA) of 1995

    This regulation does not require information collection, and a 
submission under the PRA is not required.

[[Page 40766]]

Regulatory Flexibility Act (RFA)

    The Department certifies that this document will not have a 
significant economic effect on a substantial number of small entities 
under the RFA (5 U.S.C. 601 et seq.). This revised rule does not have a 
significant effect on a substantial number of small entities. We are 
revising this rule to allow us the flexibility to select the method for 
a prospective bidder at an OCS lease sale to submit a bonus payment. If 
we select EFT for the method of submitting bonus payments, it will be 
easy for small companies to submit bonus payments because any small 
company has access to a commercial bank that routinely uses EFT. All 
current lessees must transmit the remaining 80 percent of their bonus 
payment and their first year rental payment via EFT. The regulation has 
been effective since 1984. This should not be a significant burden. The 
cost for establishing an account for a small company should be nominal. 
The bank will charge a fee per wire transfer which may be as high as 
$30, but if a company has a large volume of wire transfers, the bank 
may only charge about a dollar or less per wire transfer. In the worst 
case scenario, if 30 small companies (average for recent sales) submit 
a bid during a lease sale, at $30 per EFT wire transfer, the total cost 
for all small companies for a typical sale is $900.
    This rule only affects lessees on the OCS. We use Standard Industry 
Code 1381, Drilling Oil and Gas Wells, to characterize this group. 
There are 1,380 firms that drill oil and gas wells onshore and 
offshore. Of these, approximately 130 companies who are offshore 
lessees/operators need to follow our rule. According to Small Business 
Administration (SBA) estimates, 39 companies qualify as large firms and 
91 as small firms. The SBA defines a small business as having either 
(a) annual revenues of $5 million or less for exploration service and 
field service companies, or (b) less than 500 employees for drilling 
companies and for companies that extract oil, gas, or natural gas 
liquids.
    The rule gives us the flexibility to make adjustments to determine 
which method of bid submission is preferable (based on technological 
advances) for a bidder at an OCS lease sale to submit a bonus payment. 
We believe both bidders and MMS realize this efficiency. When using 
EFT, which is now commonplace, a bidder will need to advise its 
commercial bank to submit its bonus payment via EFT. When using EFT, 
the bidder will contact the MMS Royalty Management Office designated in 
the final sale notice for the proposed lease sale.
    If EFT is used, overall lessee (prospective bidder's) costs will 
decrease as well as bid preparation time. This is not a major rule. The 
cost of implementation should be minimal, regardless of company size. 
Since one EFT transaction can be used per sale, and it costs $30 for 
the wire transfer compared to the administrative costs (e.g., fees 
charged to the companies by the bank to prepare cashier's check, staff 
time to cancel checks on bids a company does not win, and committing 
and estimating funds needed for cashier's check earlier in the bidding 
process compared to the immediacy of EFT transactions) of preparing a 
cashier's check for each individual bid, there is little doubt that 
using EFT is more cost effective and more efficient than writing a 
separate check for each high bid.
    The rule should not affect the price that a company will charge for 
its product or service. It should increase efficiency and decrease 
administrative burden. The rule should not cause any company to go out 
of business. In fact, this rule will give MMS the ability to establish 
on a sale-by-sale basis, the most efficient and effective payment 
method for both MMS and industry. If EFT is used, hundreds of dollars 
in staff time may be saved by MMS and industry.
    Some small companies may consider a change in the method by which 
they submit bids at lease sales to be significant (from paper check to 
EFT). Other companies may think the change is trivial. Several small 
companies may experience a short-term effect as they revise current 
business practices. The rule should not have a significant economic 
effect on any company qualified to participate in OCS lease sales.
    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 of MMS, call toll-free (888) 734-3247.

Small Business Regulatory Enforcement Fairness Act (SBREFA)

    This rule is not a major rule under (5 U.S.C. 804(2)) the SBREFA. 
This rule:
    (a) Does not have an annual effect on the economy of $100 million 
or more. This rule will increase the efficiency and reduce the 
administrative burden of both the Government and private industry.
    (b) Will not cause a major increase in costs or prices for 
consumers, individual industries, Federal, State, or local government 
agencies, or geographic regions. This rule will decrease costs and time 
for prospective bidders preparing for bid submission. It will reduce 
the Government's administrative burden as well. If EFT is used, the 
Government and industry will save potentially hundreds of dollars in 
bid preparation time and administrative costs. Since one EFT 
transaction can be used per sale, and it costs $30 for the wire 
transfer compared to the administrative costs of preparing a cashier's 
check for each bid, there is little doubt that using EFT is more cost 
effective and more efficient.
    (c) Does not have significant adverse effects on competition, 
employment, investment, productivity, innovation, or ability of U.S.-
based enterprises to compete with foreign-based enterprises. The rule 
will increase productivity, innovation, and ability of U.S.-based 
enterprises.

Unfunded Mandate Reform Act (UMRA) 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. A statement 
containing the information required by the UMRA (2 U.S.C. 1531 et seq.) 
is not required.

List of Subjects in 30 CFR Part 256

    Administrative practice and procedure, Continental shelf, 
Environmental protection, Government contracts, Intergovernmental 
relations, Oil and gas exploration, Public lands-mineral resources, 
Public lands-rights-of-way, Reporting and recordkeeping requirements, 
Surety bonds.

    Dated: July 12, 1999.
Sylvia V. Baca,
Assistant Secretary, Land and Minerals Management.

    For the reasons stated in the preamble, Minerals Management Service 
(MMS) amends 30 CFR part 256 as follows:

PART 256--LEASING OF SULPHUR OR OIL AND GAS IN THE OUTER 
CONTINENTAL SHELF

    1. The authority citation for part 256 continues to read as 
follows:

    Authority: 43 U.S.C. 1331 et seq.


[[Page 40767]]


    2. In Sec. 256.46, revise paragraph (b) to read as follows:


Sec. 256.46  Submission of bids.

* * * * *
    (b) MMS requires a deposit for each bid. The notice of sale will 
specify the bid deposit amount and method of payment.
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[FR Doc. 99-19262 Filed 7-27-99; 8:45 am]
BILLING CODE 4310-MR-P