[Federal Register Volume 64, Number 229 (Tuesday, November 30, 1999)]
[Rules and Regulations]
[Pages 66771-66775]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-30991]


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DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Parts 202 and 206

RIN 1010-AB57


Amendments to Gas Valuation Regulations for Indian Leases--
Additional Information Related to Valuing Indian Gas Produced From 
Leases Located in Index Zones

AGENCY: Minerals Management Service (MMS), Interior.

ACTION: Notice of Eligible Index Zones.

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SUMMARY: On August 10, 1999, MMS published a final rule titled 
``Amendments to Gas Valuation Regulations for Indian Leases,'' (64 FR 
43506) with an effective date of January 1, 2000. The gas regulations 
apply to all gas production from Indian (tribal or allotted) oil and 
gas leases (except leases on the Osage Indian Reservation). The new 
regulations resulted from a negotiated rulemaking between Indian tribes 
and allottees, oil and gas industry, and Government. The rule requires 
that MMS publish additional information related to valuing Indian gas 
produced from leases located in index zones. This document lists: the 
Index Zones Eligible

[[Page 66772]]

for the Index-Based Valuation Method; the Acceptable Publications and 
Indices to Use for the Index-Based Method; the lease prefixes 
associated with each MMS-Designated Area; and the new MMS-Designated 
Areas.

EFFECTIVE DATE: January 1, 2000.

ADDRESSES: Address all comments concerning this document to David S. 
Guzy, Chief, Rules and Publications Staff, P.O. Box 25165, MS 3021, 
Denver, Colorado, 80225-0165.

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]; mailing address, Minerals Management Service, 
Royalty Management Program, Rules and Publications Staff, P.O. Box 
25165, MS 3021, Denver, Colorado, 80225-0165.

SUPPLEMENTARY INFORMATION: The intent of the amendments to the 
valuation regulations is to ensure that Indian mineral lessors receive 
the maximum revenues from mineral resources on their land consistent 
with the Secretary of the Interior's (Secretary) trust responsibility 
and lease terms. It is also our desire to improve the regulatory 
framework so that information is available which would permit lessees 
to comply with the regulatory requirements at the time that royalties 
are due.
    Under the rule, the lessee will determine the value of gas 
production based upon whether the gas is produced from an index zone or 
not produced from an index zone. MMS defines an index zone as a field 
or area with an active spot market and published indices applicable to 
that field or area that are acceptable to MMS.
    The rule requires that MMS publish the following: the index zones 
that are eligible for the index-based valuation method; leases that MMS 
excluded from index-based valuation; and any index zones that MMS 
disqualified. If market conditions change so that an index-based method 
for determining value is no longer appropriate for an index zone, MMS 
will hold a technical conference to consider disqualification of an 
index zone. Under the rule, if an index is disqualified, then 
production from leases under that index zone cannot be valued under the 
index-based valuation method. At this time, MMS has not disqualified 
any index zones.
    The rule also requires that MMS periodically publish a list of MMS-
approved publications and indices to use in computing the index-based 
formula price and the lease prefixes associated with each MMS-
designated area (including any new MMS-designated areas.) MMS will 
publish future notices in the Federal Register announcing any changes 
to the index zones, changes to the acceptable publications and indices, 
and any new MMS-designated areas.
    Table No. 1 below provides a list of the index zones that are 
eligible for the index-based valuation method.

                               Table No. 1.--MMS-Designated Areas and Index Zones
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              MMS-Designated areas                                          Index zones
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Unitah and Ouray Reservation....................  Central Rocky Mountains
Alabama-Coushatta...............................  East Texas
Wind River Reservation..........................  Northern Rocky Mountains
Jicarilla Apache Reservation, Navajo              San Juan Basin
 Reservation, Southern Ute Reservation, Ute
 Mountain Ute Reservation.
Counties: Alfalfa, Beaver, Cimarron, Cleveland,   Oklahoma-Zone 1.
 Creek, Garfield, Grant, Harper, Kay, Lincoln,
 Noble, Nowata, Oklahoma, Pawnee, Payne,
 Pottawatomie, Rogers, Texas, Tulsa, Washington,
 Woods.
Counties: Beckham, Blaine, Caddo, Canadian,       Oklahoma-Zone 2.
 Comanche, Cotton, Custer, Dewey, Ellis, Garvin,
 Grady, Greer, Harmon, Jackson, Jefferson,
 Kingfisher, Kiowa, Logan, Major, McClain, Roger
 Mills, Stephens, Tillman, Washita, Woodward
Counties: Adair, Atoka, Bryan, Carter, Cherokee,  Oklahoma-Zone 3
 Choctaw, Coal, Craig, Delaware, Haskell,
 Hughes, Johnston, Latimer, Le Flore, Love,
 Marshall,Mayes, McCurtain, McIntosh, Murray,
 Muskogee, Okfuskee, Okmulgee, Ottawa,
 Pittsburg, Pontotoc, Pushmataha, Seminole,
 Sequoyah, Wagoner.
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    Table No. 2 below contains the MMS-approved publications that 
establish index prices that accurately reflect the value of production 
in the field or area where the production occurs.

                                     Table No. 2.--MMS-Approved Publications
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    MMS-approved publications             Which issue?              Which table?         Which spot gas prices?
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Inside F.E.R.C.'s Gas Market       Use the issue containing   Use the table labeled     Use the high end of the
 Report.                            the spot gas prices for    ``Prices of Spot Gas      range of the applicable
                                    the first of the month.    Delivered to              spot gas price.
                                                               Pipelines''.
Natural Gas Intelligence Weekly    Use the issue containing   Use the table labeled     Use the high end of the
 Gas Price Index.                   the Bidweek Range for      ``Spot Gas Prices.''.     range of the applicable
                                    the month.                                           Bidweek price.
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    Under the rule, any publication may petition MMS to be added to the 
list of acceptable publications by writing to: Minerals Management 
Service, Royalty Valuation Division, P.O. Box 25165, Mail Stop 3150, 
Denver, Colorado 80225-0165.
    As stated in 30 CFR 206.172 (64 FR 43517), an Indian tribe may ask 
MMS to exclude some or all of its leases from valuation under the 
index-based valuation method. After consulting with the Bureau of 
Indian Affairs (BIA), MMS may also exclude any Indian allotted leases 
from valuation under the index-based valuation method. If MMS approves 
any requests for exclusion from an index zone, the lessee must value 
the production under the non-index-based valuation method.
    Revenue analysis indicated that some Indian leases would receive 
less revenue under the index methodology than under gross proceeds 
methodology. As a result of this analysis and after consulting with 
BIA, MMS excluded the Ute allotted leases in the Uintah and Ouray 
Reservation and the Navajo allotted leases in the Navajo Reservation 
from valuation under the index-based method. MMS also approved the Ute 
Indian Tribe's request to exclude the Ute Tribal leases in the Uintah 
and

[[Page 66773]]

Ouray Reservation from valuation under the index-based method.
    Because of these exclusions, MMS also terminated the previously 
defined designated areas for Uintah and Ouray Reservation and the 
Navajo Reservation. MMS designated these two areas for royalty 
computation purposes in the August 10, 1999, final rule (64 FR 43506). 
Accordingly, we created the following four new MMS-designated areas:
    1. Ute Tribal Leases in the Uintah and Ouray Reservation;
    2. Ute Allotted Leases in the Uintah and Ouray Reservation;
    3. Navajo Tribal Leases in the Navajo Reservation; and
    4. Navajo Allotted Leases in the Navajo Reservation.
    Table No. 3 below contains the index zones with the associated MMS-
designated areas and also includes the list of acceptable publications 
and the indices to use for the index-based valuation method. Lessees 
should use this table when calculating the value of gas produced from 
leases from an index zone.

                          Table No. 3.--Index Zones, MMS-Designated Areas, and Indices
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                                                     MMS-approved publications for index zones
                                 -------------------------------------------------------------------------------
           Index zone                           Natural
                                    Inside    gas intel.                      Spot gas prices
                                    FERC's      report
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East Texas......................          X               Natural Gas Pipeline Co. of America
    Includes: Alabama-Coushatta.                             Louisiana Zone
                                          X               Texas Eastern Transmission Corp.
                                                             East Texas Zone
                                                             South Texas Zone
                                          X               Tennessee Gas Pipeline Co.
                                                             Texas (zone 0)
                                          X               Transcontinental Gas Pipe Line Corp.
                                                             Zone 2 (pooling point)
                                          X               Trunkline Gas Co.
                                                             Texas
                                                      X   East Texas
                                                             NGPL Texok
                                                             Tennessee
                                                             Texas Eastern E. TX
                                                             Trunkline
                                                             Houston Pipeline
                                                             MidCon Texas
                                                      X   South Texas
                                                             Florida Gas Zone 1
                                                             Texas Eastern S. TX
                                                             Tennessee
Northern Rocky Mountains........          X               Colorado Interstate Gas Co.
                                                             Rocky Mountains
    Includes: Wind River                              X   Rocky Mountains
     Reservation.
                                                             CIG
San Juan Basin..................          X               El Paso Natural Gas Co.
                                                              San Juan Basin
    Includes: Jicarilla Apache                        X   Rocky Mountains
     Reservation.                                             El Paso non-Bondad
                                                              Transwestern San Juan
    Navajo Tribal Leases in the
     Navajo Reservation
    Southern Ute Reservation
    Ute Mountain Ute Reservation
Oklahoma--Zone 1
    Includes the following                X               ANR Pipeline Co.
     counties: Alfalfa, Beaver,                              Oklahoma Natural Gas Pipeline Co. of America
     Cimarron, Cleveland, Creek,          X                  Mid-Continent Zone
     Garfield, Grant, Harper,
     Kay, Lincoln, Noble,
     Nowata, Oklahoma, Pawnee,
     Payne, Pottawatomie,
     Rogers, Texas, Tulsa,
     Washington, Woods.
                                          X               Northern Natural Gas Co.
                                                             Texas, Oklahoma, Kansas
                                          X               Panhandle Eastern Pipe Line Co.
                                                             Texas, Oklahoma (mainline)
                                          X               Reliant Energy Gas Transmission Co.
                                                             West
                                          X               Williams Gas Pipelines Central Inc.
                                                             Texas, Oklahoma, Kansas
                                                      X   Mid-Continent
                                                             ANR SW
                                                             NGPL Mid-Continent
                                                             Northern Natural Mid 10-13
                                                             Panhandle Eastern
                                                             Enogex
                                                             Reliant West (NorAm)
                                                             Williams

[[Page 66774]]

 
Oklahoma--Zone 2
    Includes the following                X               ANR Pipeline Co.
     counties: Beckham, Blaine,                               Oklahoma
     Caddo, Canadian, Comanche,           X               Natural Gas Pipeline Co. of America
     Cotton, Custer, Dewey,                                  Mid-Continent Zone
     Ellis, Garvin, Grady,
     Greer, Harmon, Jackson,
     Jefferson, Kingfisher,
     Kiowa, Logan, Major,
     McClain, Roger Mills,
     Stephens, Tillman, Washita,
     Woodward.
                                          X               Reliant Energy Gas Transmission Co.
                                                              West
                                          X               Northern Natural Gas Co.
                                                             Texas, Oklahoma, Kansas
                                          X               Panhandle Eastern Pipe Line Co.
                                                             Texas, Oklahoma (mainline)
                                          X               Williams Gas Pipelines Central Inc.
                                                             Texas, Oklahoma, Kansas
                                                      X   Mid-Continent
                                                             ANR SW
                                                             NGPL Mid-Continent
                                                             Reliant West (NorAm)
                                                             Northern Natural Mid 10-13
                                                             Panhandle Eastern
                                                             Enogex
                                                             Williams
Oklahoma--Zone 3
    Includes the following                X               Natural Gas Pipeline Co. of America
     counties: Adair, Atoka,                                  Texok Zone
     Bryan, Carter, Cherokee,             X               Reliant Energy Gas Transmission Co.
     Choctaw, Coal, Craig,                                    East
     Delaware, Haskell, Hughes,           X               Williams Gas Pipelines Central Inc.
     Johnston, Latimer, Le                                    Texas, Oklahoma, Kansas
     Flore, Love, Marshall,
     Mayes, McCurtain, McIntosh,
     Murray, Muskogee, Okfuskee,
     Okmulgee, Ottawa,
     Pittsburg, Pontotoc,
     Pushmataha, Seminole,
     Sequoyah, Wagoner.
                                                      X   East Texas
                                                             NGPL Texok
                                                      X   Mid-Continent
                                                             Reliant East (NorAm)
                                                             Williams
----------------------------------------------------------------------------------------------------------------

    Most Indian lease terms require accounting for comparison (dual 
accounting) when gas produced from the lease is processed. Under the 
rule, the lessee may elect to perform actual dual accounting or 
alternative dual accounting. The rule requires that MMS publish a list 
of the lease prefixes associated with each MMS-designated area for the 
purpose of the dual accounting election. The dual accounting election 
for a designated area must apply to all of the lessee's Indian leases 
in that area.
    Table No. 4 contains the lease prefixes and associated MMS-
designated areas:

                              Table No. 4.--Lease Prefixes and MMS-Designated Areas
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          MMS-designated areas                                        Lease prefixes
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Alabama-Coushatta......................  615.
Blackfeet Reservation..................  507, 512, 513, 514, 515, 517, 526.
Crow Reservation.......................  520, 619.
Fort Belknap...........................  538.
Fort Berthold..........................  528, 529, 540.
Fort Peck Reservation..................  506, 523, 533, 536, 622.
Oklahoma Counties:
    Alfalfa, Beaver, Cimarron,           503, 505, 510, 511, 518, 521, 601, 602, 607, 615, 714.
     Cleveland, Creek, Garfield, Grant,
     Harper, Kay, Lincoln, Noble,
     Nowata, Oklahoma, Pawnee, Payne,
     Pottawatomie, Rogers, Texas,
     Tulsa, Washington, Woods.
Oklahoma Counties:
    Beckham, Blaine, Caddo, Canadian,    503, 505, 518, 601, 602, 607.
     Comanche, Cotton, Custer, Dewey,
     Ellis, Garvin, Grady, Greer,
     Harmon, Jackson, Jefferson,
     Kingfisher, Kiowa, Logan, Major,
     McClain, Roger Mills, Stephens,
     Tillman, Washita, Woodward.
Oklahoma Counties:
    Adair, Atoka, Bryan, Carter,         503, 505, 511, 601, 602, 607, 615.
     Cherokee, Choctaw, Coal, Craig,
     Delaware, Haskell, Hughes,
     Johnston, Latimer, Le Flore, Love,
     Marshall, Mayes, McCurtain,
     McIntosh, Murray, Muskogee,
     Okfushee, Okmulgee, Ottawa,
     Pittsburg, Pontotoc, Pushmataha,
     Seminole, Sequoyah, Wagoner.
Navajo Allotted Leases in the Navajo     516, 525, 527, 621, 623.
 Reservation.
Navajo Tribal Leases in the Navajo       415, 516, 525, 527, 620, 621, 623.
 Reservation.

[[Page 66775]]

 
Northern Cheyenne Reservation..........  None.
Rocky Boys Reservation.................  053, 154, 537, 889.
Southern Ute Reservation...............  519, 522, 524, 614, 750.
Turtle Mountain Reservation............  610.
Ute Mountain Ute Reservation...........  519, 522, 524, 614, 750.
Ute Allotted Leases in the Uintah and    509, 531, 532.
 Ouray Reservation.
Ute Tribal Leases in the Uintah and      509, 531, 532.
 Ouray Reservation.
Wind River Reservation.................  502, 535, 634.
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    Dated: November 23, 1999.
Lucy Querques Denett,
Associate Director for Royalty Management.
[FR Doc. 99-30991 Filed 11-29-99; 8:45 am]
BILLING CODE 4310-MR-P