[Federal Register Volume 65, Number 26 (Tuesday, February 8, 2000)]
[Proposed Rules]
[Pages 6048-6062]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-2367]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 270, 375 and 381

[Docket No. RM00-6-000]


Well Category Determinations

January 27, 2000.
AGENCY:  Federal Energy Regulatory Commission.

ACTION:  Notice of proposed rulemaking.

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SUMMARY:  The Federal Energy Regulatory Commission (Commission) 
proposes to amend its regulations to reinstate certain regulations 
involving well category determinations for Internal Revenue Code 
Section 29 tax credits, but limited to certain well recompletions 
commenced after January 1,1993. These regulations were deleted by the 
Commission in Order No. 567.

DATES:  Comments on the proposed rulemaking are due on or before April 
10, 2000.

ADDRESSES:  File comments on the notice of proposed rulemaking with the 
Office of the Secretary, Federal Energy Regulatory Commission, 888 
First Street, NE, Washington, DC 20426. Comments should reference 
Docket No. RM00-6-000.

FOR FURTHER INFORMATION CONTACT:
Marilyn Rand (Technical Information), Office of Pipeline Regulation, 
888 First Street, NE, Washington, DC 20426, (202) 208-0444
Jacob Silverman (Advisory Attorney), Office of the General Counsel, 888 
First Street, NE, Washington, DC 20426, (202) 208-2078

SUPPLEMENTARY INFORMATION:  In addition to publishing the full text of 
this document in the Federal Register, the Commission provides all 
interested persons an opportunity to view and/or print the contents of 
this document via the Internet through FERC's Home Page (http://www.ferc.fed.us) and in FERC's Public Reference Room during normal 
business hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First 
Street, NE, Room 2A, Washington, DC 20426.
    From FERC's Home Page on the Internet, this information is 
available in both the Commission Issuance Posting System (CIPS) and the 
Records and Information Management System (RIMS).

--CIPS provides access to the texts of formal documents issued by the 
Commission since November 14, 1994.
--CIPS can be access using the CIPS link or the Energy Information 
Online icon. The full text of this document will be available on CIPS 
in ASCII and WordPerfect 8.0 format for viewing, printing, and/or 
downloading.
--RIMS contains images of documents submitted to and issued by the 
Commission after November 16, 1981. Documents from November 1995 to the 
present can be viewed and printed from FERC's Home Page using the RIMS 
link or the Energy Information Online icon. Descriptions of documents 
back to November 16, 1981, are also available from RIMS-on-the-Web; 
requests for copies of these and other older documents should be 
submitted to the Public Reference Room.
    User assistance is available for RIMS, CIPS, and the Website during 
normal business hours from our Help line at (202) 208-2222 (E-Mail to 
[email protected]) or the Public

[[Page 6049]]

Reference at (202) 208-1371 (E-Mail to 
[email protected]).
    During normal business hours, documents can also be viewed and/or 
printed in FERC's Public Reference Room, where RIMS, CIPS, and the FERC 
Website are available. User assistance is also available.

I. Introduction

    The Federal Energy Regulatory Commission (Commission) proposes to 
amend its regulations to reinstate provisions for well category 
determinations. With such determinations, natural gas producers may 
claim tax credits provided for by section 29 of the Internal Revenue 
Code (Section 29 tax credit).
    The Section 29 tax credits are available only for certain 
categories of high cost gas. In 1999, the United States Court of 
Appeals for the Tenth Circuit in True Oil Co. v. Commissioner of 
Internal Revenue \1\ (True Oil), held that, in order to obtain the tax 
credit, there must be a formal determination under the procedures 
provided by section 503 of the Natural Gas Policy Act of 1978 (NGPA) 
that the gas is high cost gas. However, after the January 1, 1993 
decontrol of wellhead sales of natural gas by the Wellhead Decontrol 
Act of 1989 (Decontrol Act),\2\ the Commission, in 1994, in Order No. 
567,\3\ deleted its regulations implementing NGPA ceiling prices, 
including the well category determination procedures under section 503, 
even though the tax credit was still available for gas produced through 
the year 2002. The True Oil decision has prompted the Commission to 
reconsider its prior action. In addition, a number of producers filed a 
petition requesting the Commission to reinstate the NGPA section 503 
well category procedures because at present while producers are 
entitled to the section 29 tax credit for qualified gas, there is no 
procedure to obtain the prerequisite determination.\4\ The Department 
of Energy (DOE) filed in support of the producers' petition and 
requested the Commission to renew the well category section 503 
procedures as consistent with the nation's energy policy of increasing 
the supply of domestically produced natural gas. As a result, the 
Commission is proposing to reinstate some of these regulations, with 
modifications, in order to permit qualifying parties to obtain the tax 
credit provided under section 29 of the Internal Revenue Code (Code). 
Determinations would be limited to well recompletions commenced after 
January 1, 1993, and which comply with IRS Revenue Ruling 93-54, as 
detailed below.
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    \1\ 170 F.3d 1294 (10th Cir. 1999).
    \2\ Pub. L. No. 101-60; 103 Stat. 157 (1989).
    \3\ Removal of Outdated Regulations Pertaining to the Sales of 
Natural Gas Production, 59 FR 40240, FERC Stats. & Regs., 
Regulations Preambles 1991-1996 para. 30,999 (1994), Order on 
Rehearing, 69 FERC Paras.  61,055 and 61,042 (1994). A petition to 
review the deletion of other provisions in these regulation was 
denied by the Court of Appeals in Hadson Gas System, Inc. v. FERC, 
75 F.3d 680 (D.C. Cir. 1996).
    \4\ The producers consisted of Smith Management Company; Patina 
Oil & Gas; BP Amoco; Burlington Resources; Vastar Resources, Inc.; 
Red Willow Production Co.; Cross Timbers Oil Company; Colorado Oil & 
Gas Association; Coalbed Methane Association of Alabama; Cabot Oil & 
Gas Corp.; and HS Resources, Inc.
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II. Background

A. The NGPA and the Adoption of the Tax Credits

    The NGPA established a system of varying price ceilings for 
different categories of natural gas. Among other things, section 107(b) 
authorized the Commission to establish incentive prices for various 
categories of unconventional natural gas. Section 107(c) of the NGPA 
specifically identified four types of natural gas deemed to be ``high-
cost natural gas'', which were gas from (a) deep wells, (b) 
geopressurized brine, (c) coal seams, and (d) Devonian shale. In 
addition, section 107(c)(5) of the NGPA gave the Commission the 
authority to include in the term ``high-cost natural gas'' any natural 
gas ``produced under such other conditions as the Commission determines 
to present extraordinary risks or costs.'' NGPA section 503 set forth 
the procedures used for determining whether gas qualified as section 
107(c) ``high-cost natural gas.'' Under that section the agency having 
regulatory jurisdiction with respect to the production of the natural 
gas in question (the jurisdictional agency) \5\ makes the initial 
determination, and submits it to the Commission. The Commission can 
either affirm, reverse, remand, make a preliminary finding on, or 
simply take no action, regarding the agency's determination. If the 
Commission takes no action within 45 days after receipt of the agency's 
determination, that determination becomes final. Judicial review is 
available under section 503 only if the Commission remands or reverses 
the determination.
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    \5\ That agency may be either a State or Federal agency.
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    In Order Nos. 99 and 99-A,\6\ the Commission exercised its 
authority under NGPA sections 107(b) and (c)(5) to define gas produced 
from tight formations as high-cost gas, and to establish an incentive 
ceiling price for that gas, and also set forth procedures for the 
designation of specific portions of formations as tight formations. 
After the designation of a portion of a formation as a tight formation, 
in order for production from a specific well to qualify as tight 
formation gas, the appropriate state or federal jurisdictional agency 
was required to make a determination that that well was producing gas 
from the formation which had been found to be a tight formation, and 
submit its determination to the Commission. In Williston Basin 
Interstate Pipeline Co. v. FERC,\7\ the Court held that jurisdictional 
agency tight formation determinations must be reviewed only through the 
procedural scheme set forth in NGPA section 503.
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    \6\ Regulations Covering High-Cost Natural Gas Produced From 
Tight Formations, 45 FR 56034, FERC Stats. & Regs., Regulations 
Preambles 1977-1981 para. 30,183 (1980); reh'g denied, FERC Statutes 
and Regulations, Regulations Preambles 1977-1981 para. 30,198 (1980) 
(Order No. 99-A); aff'd, Pennzoil Co. v. FERC, 671 F.2d 119 (5th 
Cir. 1982).
    \7\ 816 F.2d 777 (D.C. Cir. 1987).
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    Two years after passage of the NGPA, Congress enacted section 29 of 
the Internal Revenue Code as part of the Crude Oil Windfall Profit Tax 
of 1980. Section 29 allowed taxpayers to claim a credit for qualified 
fuels (1) which were produced from wells drilled between January 1, 
1980 and December 31, 1990,\8\ and (2) which were sold before January 
1, 2001. The section 29 list of qualified fuels included only the NGPA 
section 107 (c)(2)-(4) categories, and tight formation gas under 
section 107(c)(5).\9\ Section 29(c)(2)(A) also provided that the 
determination whether gas falls into a category qualifying for the tax 
credit ``shall be made in accordance with section 503 of the [NGPA].''
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    \8\ For purposes of the tax credit, the initial drilling had to 
be started after January 1, 1980, and this date was never changed, 
although the period was extended in subsequent legislation as 
described below. Thus, this starting date is assumed throughout.
    \9\ Deep gas and other categories of gas under section 107 
(c)(5) were never eligible for the tax credit.
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    The Natural Gas Wellhead Decontrol Act of 1989 repealed all 
remaining NGPA price controls on wellhead sales of natural gas, as well 
as NGPA section 503, effective January 1, 1993. The Senate Committee on 
Energy and Natural Resources' Report on the 1989 Wellhead Decontrol Act 
stated, ``The Committee intends that any incomplete section 503 
procedures continue to be carried out by the state agencies and the 
FERC, so that the necessary determination can be made as to sales of 
gas delivered before contract expiration and decontrol.'' \10\ The 
Senate

[[Page 6050]]

Report also expressly noted that section 29 of the Code provided for 
tax credits for certain types of fuels which qualify under the NGPA 
section 503 procedures. The Senate Report stated that approval of the 
Decontrol Act, which repealed the NGPA sections referenced in section 
29, was ``not intended * * * to reflect an adverse judgment by the 
Committee as to the merits of tax credits for any categories of natural 
gas production that might be affected by such action.'' \11\
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    \10\ Similarly, the House Report on the Decontrol Act states, 
``the gradual expiration of controls after enactment and before 
January 1, 1993, and their complete expiration on and after that 
date, will not affect civil or criminal proceedings pending at the 
time of decontrol, nor any action or proceeding based on pre-
decontrol acts or conduct.''
    \11\ S. Rep. No. 101-39 at 9 (1989). Senate Committee on Energy 
and Natural Resources' Report quoted in Order No. 523, infra n. 13 
at 31,760.
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B. The Commission's Actions After Passage of the Decontrol Act

    In February 1990, before full wellhead price deregulation took 
effect under the Decontrol Act, the Commission issued Order No. 519, 
terminating the incentive ceiling price for sales of tight formation 
natural gas produced from wells spudded or recompleted after May 12, 
1990. Shortly thereafter, Congress, in the Revenue Reconciliation Act 
of 1990, extended the Section 29 tax credit so that it would be 
available for qualified fuels produced from wells drilled before 
January 1, 1993, and sold before January 1, 2003. That act also revised 
the terms of eligibility so that tight formation gas would be eligible 
for the tax credit even though the price for such gas was no longer 
regulated. However, that act made no change to the provision of Section 
29 (c)(2)(A) that the determination of eligibility for the tax credit 
shall be made in accordance with NGPA section 503.
    In Order No. 523, issued April 25, 1990, the Commission amended its 
regulations to conform them to the Decontrol Act. \12\ In that order 
the Commission recognized its duty to continue processing requests for 
well category determinations under NGPA section 503 to allow producers 
to obtain tax credits, even if the determinations no longer affected 
the price of the gas. After summarizing the statement in the Senate 
Report on the Decontrol Act that the Act was not intended to reflect an 
adverse judgment by the Committee as to the merits of tax credits for 
decontrolled gas, the Commission stated:

    \12\ Order Implementing the Natural Gas Wellhead Decontrol Act 
of 1989, 55 FR 17425, FERC Stats. & Regs., Regulations Preambles 
1986-1990 para.30,887 (1990).
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    In view of the legislative history noted above which indicates 
that Congress did not intend the Decontrol Act to limit the 
availability of tax credits for qualified fuels (footnote), the 
Commission will continue to process well determinations, until 
January 1, 1993, in order to allow producers to obtain tax credits 
that are dependent upon such determinations even if the gas has been 
otherwise decontrolled.\13\
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    \13\ Id. at 31,760. The footnote in the quote made reference to 
a letter from Senator J. Bennett Johnston to Commission Chairman 
Allday as also supporting this interpretation of the Decontrol Act. 
The letter was not quoted in the order. Senator Johnston's letter 
stated:
    Until such time as the Internal Revenue Code is amended to 
provide a new mechanism for qualification for the nonconventional 
fuels tax credit, we believe that the Commission should continue to 
make the well category determination procedure available for these 
purposes. As sponsors of the wellhead decontrol legislation, we 
believe that this would be consistent with the intent of such 
legislation. We request that this letter be made part of the record 
in the rulemaking proceeding.
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    Congress' decision in the Revenue Reconciliation Act of 1990 to 
reinstate the tax credit for tight formation gas even though the price 
for such gas was no longer regulated necessitated certain technical 
changes in the standards the Commission used to determine whether gas 
qualified as tight formation gas. On April 9, 1992, the Commission 
issued Order No. 539,\14\ making the necessary technical changes. In 
addition, Order No. 539 clarified the Commission's statement in Order 
No. 523 that it would only continue processing well determination 
requests until December 31, 1992. A concern had been expressed to the 
Commission that it would not be practical for the Commission to 
complete the processing of well determination requests with respect to 
wells drilled through December 31, 1992 by that same date, since 
ordinarily such requests are not filed until after the well is drilled. 
The Commission stated that both the House and Senate committee reports 
on the Decontrol Act had stated that decontrol on January 1, 1993, 
would not affect proceedings pending on that date. Therefore, the 
Commission concluded that Congress did not intend that repeal of NGPA 
Title I and section 503, would terminate the authority of the 
Commission to process well category applications filed with the 
jurisdictional agencies on or before December 31, 1992. Accordingly, 
the order stated that the Commission would continue to process notices 
of determination which were filed with the jurisdictional agencies by 
December 31, 1992, and received by the Commission by June 30, 1993.\15\
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    \14\ Qualifying Certain Tight Formation Gas for Tax Credit, 57 
FR 13009, FERC Stats. & Regs., Regulations Preambles 1991-1996 
para.30,940 (1992).
    \15\ The Commission noted in Order No. 539 that a complete 
application might not be able to be filed with the jurisdictional 
agency by December 31, 1992. Accordingly, the Commission stated that 
``the jurisdictional agencies have the discretion to assign a filing 
date to an application that is substantially complete and specify a 
date when a complete application must be filed.'' FERC Stats. & 
Regs., Regulations Preamble 1991-1996 para.30,940 n. 41 at 30,488. 
In Order No. 539-C, the Commission stated the same would be true for 
recompletions. In all cases, however, the well had to be initially 
drilled before January 1, 1993.
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    On July 7, 1992, the Commission issued Order No. 539-A,\16\ denying 
rehearing of Order No. 539. On rehearing, no party contended that the 
Commission should continue to process well determination requests under 
NGPA section 503 for wells drilled or recompleted \17\ after January 1, 
1993. However, parties did seek an extension of the December 31, 1992 
date for producers to file applications with applicable jurisdictional 
agencies for well category determinations for pre-January 1, 1993 
wells. The Commission denied that request, explaining that while both 
the jurisdictional agencies and the Commission have authority to 
complete the processing of applications for well category 
determinations under section 503 which were pending on December 31, 
1992, there was no authority to commence new proceedings before 
jurisdictional agencies after that date. The Commission reiterated that 
the December 31, 1992 deadline was jurisdictional, stating:
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    \16\ FERC Stats. & Regs., Regulations Preambles 1991-1996 
para.30,947 (1992).
    \17\ The Commission has defined a recompletion as any 
perforation that occurs after reentry of a well. Thus, a perforation 
that occurs as part of the initial entry of the well is not a 
recompletion. But, once the well has been initially entered and 
perforated, and the tool used to perforate has been withdrawn, and 
the well is subsequently reentered, any subsequent perforations 
constitute recompletions. Oklahoma Corporation Commission and Oil 
Conservation Division, 68 FERC para.61,323 at 62,320 (1994).
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    In light of the fact that--effective January 1, 1993--decontrol 
applies to all section 503 procedures carried out by the state 
agencies and the FERC, the Commission clarifies that the December 
31, 1992 and September 30, 1993 deadlines pertain to all NGPA 
categories, not just applications and determinations under section 
107(c)(5).\18\
    However, the Commission extended the date by which jurisdictional 
agencies could submit their determinations to the Commission until 
September 30, 1993.
    On July 12, 1993, the Commission issued Order 539-C,\19\ extending 
until April 30, 1994, the time for jurisdictional agencies to submit 
their determinations. \20\ The Commission explained that the reason for 
continuing

[[Page 6051]]

 to review agency determinations for a transition period, was ``while 
NGPA Section 107 well category determinations have no price 
consequence, they are necessary to obtain the Section 29 tax credit.'' 
\21\ However, the Commission reiterated that it ``will not accept 
determinations where the well was spudded or recompletion commenced on 
or after January 1, 1993.'' \22\
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    \18\ FERC Stats. & Regs., Regulations Preambles 1991-1996 
para.30,947 at 30,513 (1992).
    \19\ FERC Stats. & Regs., Regulations Preambles 1991-1996 
para.30,974 (1993).
    \20\ Id. at 30,858.
    \21\ Id.
    \22\ Id. at n. 12.
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C. The Internal Revenue Service's Recompletion Ruling

    As discussed above, section 29 of the Code provides that, in order 
to qualify for the tax credit, gas must be produced from a well drilled 
before January 1, 1993. During the period the Commission was issuing 
the above orders, both the Commission and all the parties appear to 
have assumed that this provision of Section 29 meant that the tax 
credit would not be available for wells originally drilled before 
December 31, 1992, that were recompleted after December 31, 1992. In 
any event, no party raised the issue whether the Commission's refusal 
to process well determination requests for wells recompleted after 
December 31, 1992, would improperly prevent producers from obtaining 
tax credits for such wells.
    On August 16, 1993, a month after the Commission issued Order No. 
539-C, the IRS issued Revenue Ruling 93-54,\23\ which took a different 
view of the eligibility of recompletions after January 1, 1993 to 
receive the Section 29 tax credit. The IRS interpreted the provision of 
Section 29 that states that gas must be produced from a well drilled 
before January 1, 1993, as permitting tax credits for non-conventional 
fuels produced from a well that was drilled before January 1, 1993, 
through a post-January 1, 1993 recompletion in the well, as long as the 
recompletion does not involve additional drilling to deepen or extend 
the well. The IRS reasoned that the drilling deadline in Section 29 
referred to the date of the initial drilling of the well, and not to 
the date of any subsequent recompletion in the portion of the well 
which had already been drilled.
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    \23\ 1993-2 CB.3 (1993).
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    After the IRS Revenue Ruling 93-54, the Commission received 
jurisdictional agency determinations for recompletions commenced after 
January 1, 1993. However, the Commission refused to process those 
submissions relating to those recompletions on the ground that the 
Decontrol Act's repeal of NGPA section 503 eliminated the Commission's 
authority to review well determinations for wells recompleted after 
December 31, 1992. For example, in Railroad Commission of Texas,\24\ 
the Commission returned two well determinations to the jurisdictional 
agency because they were for well recompletions commenced after January 
1, 1993. The Commission observed that regardless of the Commission's 
action, ``the IRS has the responsibility to determine whether 
production from a well that has not received a determination under NGPA 
section 503 is eligible for a tax credit.'' \25\ In Oklahoma 
Corporation Commission and Oil Conservation Division,\26\ the 
Commission rejected that part of the jurisdictional agency's 
determination that related to recompletions after December 31, 1992.
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    \24\ 66 FERC para.61,130 (1994).
    \25\ Id. at n.12, 61,236.
    \26\ 68 FERC para.61,323(1994).
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    Producers sought review of the Commission's action, and argued to 
the Court that the Commission had misapplied the Commission's own 
definition of recompletion, and that by refusing to process these 
determinations, the Commission was improperly denying them the ability 
to obtain the Section 29 tax credit they were entitled to because the 
IRS had stated that such a recompletion could receive the tax credit. 
In Marathon Oil Company versus FERC, \27\ (Marathon Oil) the Court 
upheld the Commission's refusal to process the post-December 31, 1992 
recompletion determinations. The Court stated the IRS was the agency 
responsible for granting the tax credit, not the Commission. The Court 
noted that:
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    \27\ 68 F.3d 1376 (D.C. Cir. 1995).

    While the IRS might be required to apply FERC's substantive 
definition of tight formation gas, it does not seem to us obliged to 
employ the same eligibility limitations that the Commission has 
adopted. Indeed, a revenue ruling seems to indicate that the IRS 
will consider recognizing a tax credit for gas from wells that would 
no longer be eligible to receive a tight formation gas designation 
from FERC (citing Revenue Ruling 93-54).\28\
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    \28\ Id. at 1379.

    The Court added that the Commission has obviously changed its mind 
as to the necessity of its role regarding tax credits, because the 
Commission had previously stated it was continuing to process well 
determinations after section 503 was repealed to enable parties to get 
the tax credit. \29\ The Court concluded since ``the IRS may well 
simply ignore FERC's determination during its phase-out period'' (i.e. 
the period after January 1, 1993), ``FERC's actions in this case have 
no necessary legal significance bearing on the IRS' decision whether to 
grant the tax credit,'' \30\ and denied the petitions for review.
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    \29\ Id.
    \30\ Id.
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    The Court in Marathon did not directly discuss whether the 
Commission had the authority to process well determinations for 
recompletions commenced after the Decontrol Act's effective date. 
Rather, the Court concluded that there was no injury to the party from 
the Commission's action of not processing the determination because it 
did not foreclose the party from obtaining the tax credit from the IRS.
    Following the Marathon decision, the Commission continued to 
decline to process jurisdictional agency determinations for post-
December 31, 1992 recompletions. However, since it appeared that the 
IRS would permit the Section 29 credit for such recompletions without 
any Commission action, there did not seem to be any need for the 
Commission to reconsider its position.
    In addition, on July 29, 1994, the Commission issued Order No. 
567,\31\ deleting regulations that were no longer required due to the 
decontrol of wellhead sales of natural gas. Among the regulations the 
Commission deleted were those in Part 270 through Part 275 of its 
regulations which set forth eligibility requirements, filing 
requirements, and the procedures for making well determinations under 
section 503 of the NGPA. The Commission concluded that those 
regulations were no longer needed because the Decontrol Act had 
repealed NGPA section 503 and the deadline for jurisdictional agency 
determinations to be filed with the Commission had passed.\32\
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    \31\ Supra, n.3.
    \32\ The Commission stated that rescission of Part 275 was 
prospective only and any timely filed applications for NGPA well 
category determination proceedings still pending before the 
Commission would continue to be subject to the requirements of Part 
275.
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    Thus matters stood from 1994 until the True Oil decision changed 
the legal landscape.

D. The 10th Circuit's True Oil Decision

    In 1999, in True Oil v. Commissioner of Internal Revenue,\33\ the 
Tenth Circuit reviewed the IRS's denial of a claim of the Section 29 
credit because the producer had not obtained a formal well category 
determination from the jurisdictional agency or the

[[Page 6052]]

Commission. The well was completed in 1984, but due to an oversight, no 
well-category determination application was filed with the 
jurisdictional agency. There was no issue whether the well could have 
qualified for the tax credit if there had been a determination. On 
appeal, the producer asserted that the reference to section 503 of the 
NGPA in section 29(c)(2)(A) merely incorporated the Commission's 
substantive definitions of tight formation gas. It contended that for 
purposes of section 29(c)(2)(A), the taxpayer itself can make the 
initial determination of whether a well is producing from a tight 
formation by applying those substantive definitions. The IRS denied the 
tax credit because there had been no well category determination by any 
authority authorized to make such determination. The Tax Court upheld 
the IRS, and the 10th Circuit similarly rejected the producer's 
contention. The Court held that notwithstanding the D.C. Circuit's 
decision in Marathon Oil, certain IRS revenue rulings, and the 
Commission's last position on the lack of a need for a formal well 
determination under NGPA section 503 to qualify for the tax credit, 
``[a] producer must obtain a formal well-category determination before 
it can claim the Section 29 Credit.'' \34\ The Court stated that, 
although section 29 has been amended more than once since the repeal of 
section 503 of the NGPA, Congress has never deleted the reference to 
section 503 from section 29.
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    \33\ 170 F.3d 1264 (10th Cir. 1999).
    \34\ 170 F.3d at 1305.
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    The Court also specifically addressed the potential conflict 
between (1) the Commission's decision in Order No. 539 not to process 
well determinations for post-January 1, 1993 recompletions and (2) the 
IRS' revenue ruling one month later that gas produced from a post-
January 1, 1993 recompletion could qualify for tax credits if it was 
produced in a well initially drilled before January 1, 1993. The 
producer contended that the IRS' revenue ruling should be interpreted 
as a finding that a well determination by the Commission was 
unnecessary for a producer to qualify for a tax credit for post-January 
1, 1993 recompletions, since otherwise the revenue ruling would have 
been meaningless. The Court responded that revenue rulings do not have 
the force and effect of law and do not control when contrary to statute 
or the intent of Congress. Therefore, to the extent the revenue ruling 
could be interpreted to conflict with the requirement in section 29 of 
the Code for an NGPA section 503 determination, the Court held that it 
would not give the revenue ruling any weight. The Court then stated:

    While it is apparently true that a well recompleted after 
January 1, 1993 will not qualify for the Section 29 Credit because 
it is no longer possible to obtain a well category determination, 
this court is not at liberty to ignore the plain language of the 
statute and hold that a well-category determination is not required 
to claim the Section 29 Credit. It is the responsibility of this 
court to interpret statutes, not rewrite them.\35\
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    \35\ Id. at 1304.

    Thus, under True Oil, unless the Commission's NGPA section 503 
procedures are available, the Section 29 tax credit cannot be obtained 
for post-January 1, 1993 recompletions, despite the IRS' revenue ruling 
that post-January 1, 1993 recompletions can qualify for the tax credit 
as long as there is no additional drilling to deepen or extend the 
well.
    After the True Oil decision, a number of producers, supra n.4, 
filed a petition under Commission Rule 207, 18 CFR Sec. 385.207, 
requesting that the Commission resume the NGPA section 503 well 
determination review process. They assert that unless the Commission 
does so, Congress' will would be thwarted because Congress provided 
that the producers could claim the Section 29 tax credit for qualified 
fuels until at least January 1, 2003 but at present there is no 
procedure to obtain it for gas produced from post-January 1, 1993 
recompletions.

III. Discussion

    The Commission proposes to resume processing jurisdictional agency 
well category determinations for certain recompletions commenced after 
January 1, 1993, so the Section 29 tax credit can be claimed for 
natural gas produced from these qualifying wells. Since the agency 
responsible for ruling on the Section 29 tax credit, the IRS, will 
permit the tax credit for certain recompletions after January 1, 1993, 
and in light of the True Oil decision requiring Commission action under 
NGPA section 503 procedures for a producer to obtain the Section 29 tax 
credit, the Commission believes it can, and should, reinstate those 
procedures for well recompletions commenced after January 1, 1993, in 
wells initially drilled before January 1, 1993, until the tax credit 
ends, which is now scheduled to cease on December 31, 2002. Below, the 
Commission first discusses its legal authority to resume processing 
jurisdictional agency well category determinations under NGPA section 
503. The Commission then discusses the details of its proposal.

A. Legal Authority

    The Commission recognizes that, in Order Nos. 539 and 539-A, the 
Commission stated that the Decontrol Act had terminated the 
Commission's authority to make well category determinations under NGPA 
section 503 with respect to all drilling activity after the effective 
date of decontrol, namely January 1, 1993. However, the Commission now 
concludes that Congress, in both the Wellhead Decontrol Act and the 
Revenue Reconciliation Act of 1990, intended to authorize the 
Commission to continue to review well category determinations under 
NGPA section 503 after wellhead decontrol, to the extent such 
determinations are necessary to permit qualifying producers to receive 
tax credits under section 29 of the Code.
    At the time of Order Nos. 539 and 539-A, the Commission did not 
have to confront the possibility that its interpretation of the 
Wellhead Decontrol Act as terminating its authority to review well 
category determinations with respect to all post-December 31, 1992 
``drilling activity'' would affect the availability of the section 29 
tax credit. It was only after Order No. 539-A that the IRS issued 
Revenue Ruling 93-54, interpreting section 29 of the Code, as amended 
by the Revenue Reconciliation Act of 1990, as permitting tax credits 
for post-January 1, 1993 recompletions in wells initially drilled 
before January 1, 1993, so long as the recompletion does not involve 
additional drilling to deepen or extend the well. While the Commission 
continued to refuse to perform well category determinations under NGPA 
section 503 for post-January 1, 1993 recompletions, the Commission 
suggested that its refusal to perform well determinations did not 
necessarily conflict with the IRS's revenue ruling.\36\ This was 
because the Commission believed a formal Commission well determination 
under NGPA section 503 might not be a prerequisite for a tax credit. 
Similarly, the D.C. Circuit in Marathon Oil concluded that the 
Commission's refusal to process well category determinations did not 
injure producers, because producers might obtain the tax credit from 
the IRS without a formal NGPA section 503 determination from the 
Commission. In Marathon Oil, the jurisdictional agency had made the 
determination that the gas was from a well that met the tight formation 
requirement. Thus, neither the Commission nor the D.C. Circuit have 
thus far had to address the

[[Page 6053]]

question whether Congress intended to permit the Commission to make 
NGPA section 503 well category determinations with respect to post-
December 31, 1992 drilling activity, where such determinations are a 
necessary prerequisite to obtaining tax credits Congress authorized in 
Section 29 of the Internal Revenue Code.
---------------------------------------------------------------------------

    \36\ See 68 FERC para. 61,323 at 62,231.
---------------------------------------------------------------------------

    The Tenth Circuit's True Oil decision, combined with the IRS' 
interpretation of section 29 as authorizing tax credits for post-
December 31, 1992 recompletions, now squarely presents this question to 
the Commission. In True Oil, the Court held that section 29 of the 
Internal Revenue Code requires a formal NGPA section 503 determination 
to obtain the Section 29 tax credit, since Section 29 states that the 
tight formation determination shall be made in ``accordance with 
section 503 of the Natural Gas Policy Act of 1978.'' Moreover, in True 
Oil, the Court specifically referred to post-January 1, 1993 
recompletions as being subject to its ruling. The Court concluded:

    Although the result of our holding may appear unfair to 
producers who failed to obtain well-category determinations while 
they were being issued by FERC or to those producers who recomplete 
their wells after January 1, 1993, the judiciary is not ``licensed 
to attempt to soften the clear import of Congress' chosen words 
whenever a court believes those words lead to a harsh result (citing 
case).'' \37\
---------------------------------------------------------------------------

    \37\ 170 F.3d at 1305.

Thus, True Oil requires that in order to obtain the Section 29 tax 
credit the entire section 503 procedure must be followed, including 
Commission review of jurisdictional agency well determinations.
    Therefore, unless the Commission recommences processing of requests 
for well category determinations under NGPA section 503, producers will 
be unable to obtain tax credits for gas produced from post-January 1, 
1993 recompletions that qualify under Revenue Ruling 93-54. This will 
be true despite the fact the IRS has interpreted Section 29 of the 
Code, as amended by the Revenue Reconciliation Act of 1990, as 
authorizing tax credits for such gas. The Commission defers to the 
IRS's interpretation of Congress's intent in enacting the current 
version of section 29 as it applies to recompletions. This is because 
the IRS is the agency that administers the Code, and is responsible for 
determining whether the section 29 tax credit should be permitted in a 
particular situation. In light of the IRS' view that Congress intended 
its amendment of section 29 of the Internal Revenue Code by the Revenue 
Reconciliation Act of 1990 to permit tax credits for post-January 1, 
1993 recompletions, we believe Congress must also have intended the 
Commission to continue the NGPA section 503 procedures after the 
decontrol date for those recompletions. Otherwise, the producers could 
not obtain the very credits the IRS has found Congress intended to 
authorize.
    This conclusion is buttressed by the legislative history of the 
Decontrol Act. As the Commission found in Order No. 523, supra, that 
legislative history ``indicates that Congress did not intend the 
Decontrol Act to limit the availability of tax credits for qualified 
fuels (footnote) * * * .'' \38\ In particular, there is the statement 
in the Senate Report accompanying the Decontrol Act that refers to the 
tax credit for qualifying fuels and states that the repeal in the 
Decontrol Act of NGPA sections referenced in Section 29 of the Code was 
not intended to reflect any adverse judgment on the merits of the tax 
credit. Moreover, the Chairman of the Senate Committee involved in the 
Decontrol Act had written to the Commission that until the Code was 
amended to provide a new mechanism for qualification for the gas 
subject to the section 29 tax credit, the Commission should continue to 
make the section 503 determination.\39\ Since that time the Code has 
not been amended to provide any other mechanism for obtaining a formal 
determination even though the Section 29 tax credit is available at 
least through December 31, 2002.
---------------------------------------------------------------------------

    \38\ FERC Stats. & Regs., Regulation Preambles 1986-1990 
para.30,887 at 31,760.
    \39\ Supra, n. 13.
---------------------------------------------------------------------------

    Also, the Revenue Reconciliation Act of 1990 permitted tight 
formation gas to qualify for tax credits, even though it was no longer 
subject to NGPA ceiling prices. The Commission accordingly continued to 
process requests for well category determinations through April 1994 to 
aid producers in obtaining the tax credits, even though such 
determinations were no longer necessary to allow the gas to qualify for 
NGPA ceiling prices. Thus, despite the fact Congress originally enacted 
the NGPA section 503 well category determination procedures for the 
purpose of qualifying gas for NGPA ceiling prices, the Commission has 
previously recognized that those procedures can continue to be used, 
even where the determination has no significance for purposes of NGPA 
ceiling prices. This fact also suggests that the Wellhead Decontrol 
Act's elimination of all such price ceilings as of January 1, 1993, 
should not be viewed as requiring the Commission to cease well category 
determinations for tax credit purposes as of that date. Congress had 
previously unlinked eligibility for the tax credit from the existence 
of NGPA ceiling prices in 1990, and expanded the tax credit to tight 
formation gas.
    Enabling producers to receive the tax credit would also be 
consistent with Congress' desire to encourage, enhance, and expand the 
United States natural gas supply base, allowing legitimately qualified 
producers to call upon a tax credit associated with developing and 
producing gas from formations and wells that otherwise might not have 
been available to supply consumers.
    In summary, since the agency responsible for ruling on the Section 
29 tax credit, the IRS, will permit the tax credit for certain 
recompletions after January 1, 1993, and in light of the True Oil 
decision which requires Commission action under NGPA section 503 
procedures for a producer to obtain the Section 29 tax credit, the 
Commission believes it can, and should, reinstate those procedures for 
well recompletions commenced after January 1, 1993, in wells initially 
drilled before January 1, 1993, until the tax credit ends, which is now 
scheduled to cease on December 31, 2002. In light of this, the 
Commission proposes to reinstate these procedures until the later of 
June 30, 2003, or six months after the tax credit is no longer 
available for production from any well should Congress further extend 
the tax credit.

B. Details of the Commission's Proposal

    The Commission proposes to accept jurisdictional agency 
determinations on those post-January 1, 1993 recompletions which 
satisfy the IRS' definition under Revenue Ruling 93-54, namely, that 
the recompletion does not involve additional drilling to deepen or 
extend the well. For this purpose, the Commission proposes to reinstate 
regulations necessary to (1) define the categories of high cost gas 
eligible for the tax credit and (2) provide procedures for 
jurisdictional agencies to file their determinations and the Commission 
to review those determinations. The Commission's action to provide a 
mechanism for claiming the section 29 tax credit for gas produced from 
these recompleted wells should have no consumer price impact. This is 
because the wellhead ceiling prices were terminated long ago, and 
therefore the only effect of this proposed rule will be to enable 
producers to obtain the tax credit. DOE states that the tax credits 
will help increase the Nation's supply of domestically

[[Page 6054]]

produced natural gas by permitting unconventional gas wells to continue 
to operate. In addition to adding to the nation's natural gas supply, 
DOE states that continued operation of unconventional gas wells will be 
important in testing the new generation of petroleum technology.
    With respect to the tight formation gas category, the Commission 
action will be limited to reviewing the jurisdictional agency 
determinations for qualifying recompletions in already designated tight 
formations. Well determinations for recompletions in coal seams and 
Devonian Shale will also be accepted.\40\ The Commission proposes not 
to accept determinations with respect to either initial completions in 
wells spudded before January 1, 1993, or any pre-1993 recompletions. In 
Order No. 539, the Commission established deadlines for filing 
applications involving wells that were spudded and/or recompleted prior 
to January 1, 1993, and the time has long passed when those 
applications should have been filed. Also, in their petition, producers 
have not requested that the Commission accept determinations with 
regard to wells spudded or recompleted before January 1, 1993. However, 
parties may comment on this matter. Finally, the substantive rulings 
that the Commission has made previously concerning well determinations 
and the qualification under these NGPA section 107 category will 
continue to govern.
---------------------------------------------------------------------------

    \40\ As explained below, the Commission is not including 
geopressurized brine gas.
---------------------------------------------------------------------------

    The Commission estimates that there are probably at least 4,000 
recompletions that were performed between 1993-1999 for which a 
determination may be sought under the proposed rule, and that another 
1,500 recompletions may occur between 2000-2002, when the tax credit is 
now scheduled to end.\41\ The Commission finds the assistance of the 
State and Federal agencies to be essential to its ability to process 
the substantial number of new well category determination requests the 
Commission anticipates will be filed under the proposed rule. NGPA 
section 503 requires the jurisdictional agencies to make an initial 
well category determination, unless, as permitted by section 503(e)(2), 
the Commission enters into an agreement with a State or Federal agency 
under which the Commission would make the determinations that would 
otherwise be made by that agency. The Commission intends not to 
exercise its discretion to enter into any such agreement. Since the 
Commission's role in the producing area has virtually been eliminated, 
the Commission's resources in this area have been substantially 
reduced. Thus, the Commission must rely upon the jurisdictional 
agencies to develop the full record in these proceedings, and the 
Commission will limit its role to reviewing initial determinations made 
by the jurisdictional agencies. The Commission requests comments from 
the jurisdictional agencies whether they will make initial 
determinations under NGPA section 503, if this rule is adopted. If the 
jurisdictional agencies are not prepared to do this, the Commission may 
not proceed with the proposed rule.
---------------------------------------------------------------------------

    \41\ Although the tax credit is scheduled to expire on December 
31, 2002, it could be extended.
---------------------------------------------------------------------------

    Accordingly, the Commission is proposing to reinstate those 
portions of its prior regulations, with appropriate modifications, that 
are necessary to allow producers to obtain well category determinations 
solely for tax credit purposes. In general, the proposed regulations 
retain the definitions, the filing and notice requirements, and the 
review procedures that the Commission promulgated prior to the 
termination of the regulations due to the Decontrol Act. The 
significant changes are identified below.
    Proposed Sec. 270.101 contains the necessary definitions to 
implement well determination procedures to receive determinations for 
tax credit purposes. Definitions for tight formation gas, coal seam gas 
and Devonian shale gas, three of the types of gas eligible for tax 
credits, are included.\42\ The Commission is not including a definition 
for gas produced from geopressured brine since our past experience 
shows that there is no gas likely to qualify for this category given 
the Commission's definition of geopressured brine and the current state 
of technology. Comments on this matter are requested.
---------------------------------------------------------------------------

    \42\ We note that a new determination will not be required for 
some recompletions involving Devonian shale gas if there is a prior 
determination covering the entire gross Devonian age stratigraphic 
interval penetrated by the wellbore. The Commission will view all 
natural gas produced from a well to have been previously qualified 
as Devonian shale production if: (1) the well previously received an 
affirmative Devonian shale determination that was not reversed or 
remanded by the Commission; and (2) that determination was based on 
a gamma ray index test for non-shale footage that spans the entire 
gross Devonian age stratigraphic interval. In such cases, the 
Commission sees no reason to re-affirm what has already been 
established, i.e., that any gas produced from the gross Devonian age 
stratigraphic interval penetrated by such well qualifies as natural 
gas produced from Devonian shale within the meaning of section 
107(c)(4) of the NGPA.
---------------------------------------------------------------------------

    Proposed Sec. 270.201 limits the availability of the determination 
procedures to recompletions commenced after January 1, 1993, in wells 
initially drilled before that date. As discussed above, this reflects 
the Commission's decision to limit the determination process to correct 
the situation caused by the True Oil decision, but parties may comment 
on this matter. Similarly, the Commission is also not proposing any 
regulations that would allow a jurisdictional agency to designate 
additional tight formation areas. The designation of additional tight 
formations would require the Commission to review extensive geologic 
data. This could place an undue burden on the Commission. Also, it 
appears likely that most producing formations that qualify as tight 
formations were designated as such during the decade when such a 
designation enabled producers to qualify for a higher price ceiling.
    Consistent with the Commission's prior NGPA regulations, the 
Commission is also proposing to revise the delegation authority to the 
Director of the Office of Markets, Tariffs and Rates (OMTR) or the 
Director's designee in Sec. 375.307 to include tolling letters advising 
jurisdictional agencies notices of determination are incomplete. In 
addition, to facilitate the Commission's review under the reinstated 
procedures, the Commission is proposing to delegate to the Director of 
OMTR the authority to issue preliminary findings under the proposed 
section. However, the Commission is not proposing to delegate the 
authority to issue a final order to the Director of OMTR.
    The Commission is also proposing to revise its regulations by 
adding Sec. 381.401 to the regulations to specify a filing fee of $115 
per well determination. This reflects the last fee ($100) for review of 
a jurisdictional agency well determination that was in effect prior to 
the repeal of the determination procedures, adjusted for inflation. It 
is the Commission's best estimate, at this time, of the cost to the 
Commission to review well determinations. As in the past, this fee will 
be revised annually in accordance with Sec. 381.104. In addition, the 
past billing procedures will apply, whereby the Commission will bill 
each producer at the end of each billing year based on the number of 
determinations received during that year for that producer.
    The proposed regulations contain no provisions permitting a 
jurisdictional agency to request alternative filing requirements. The 
proposed filing requirements are not unduly burdensome and are readily 
available to producers. However, since the Commission previously 
approved alternative filing requirements for Devonian shale wells in 
Michigan based

[[Page 6055]]

on unique circumstances, the proposed regulations reflect those 
previously-approved alternate filing requirements.
    The Commission is reinstating and revising FERC Form No. 121, which 
a producer files with an application for determination. This form, a 
copy of which is attached, identifies the producer filing the 
application, the type of determination the producer is seeking, and 
information identifying the well and the completion location of the 
well. The Commission is considering whether or not to require producers 
to file this form electronically, to facilitate the Commission's 
noticing of determinations and requests comments on this issue.

IV. Environmental Statement

    The Commission excludes certain actions not having a significant 
effect on the human environment from the requirement to prepare an 
environmental assessment or an environmental impact statement.\43\ The 
instant proposed rule reinstates regulations that were previously in 
effect, and does not substantially change the effect of the underlying 
legislation or the regulations being revised. Accordingly, no 
environmental consideration is necessary.
---------------------------------------------------------------------------

    \43\ 18 CFR 380.4.
---------------------------------------------------------------------------

V. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612, requires 
rulemakings to contain either a description and analysis of the effect 
that the proposed rule will have on small entities or a certification 
that the rule will not have a significant economic impact on a 
substantial number of small entities.
    In Mid-Tex Elec. Coop. v. FERC, 773 F.2d 327 (D.C. Cir. 1985), the 
court found that Congress, in passing the RFA, intended agencies to 
limit their consideration ``to small entities that would be directly 
regulated'' by proposed rules. Id. at 342. The court further concluded 
that ``the relevant `economic impact' was the impact of compliance with 
the proposed rule on regulated small entities.'' Id. at 342.
    The instant proposed rule reinstates regulations that were 
previously in effect, and would enable entities to obtain Internal 
Revenue Code Section 29 tax credits. There is no reporting requirement, 
merely the ability to obtain a formal determination that gas qualifies 
for the tax credit. The Commission certifies that this proposed rule 
will not have a significant economic impact upon a substantial number 
of small entities.

VI. Public Reporting Burden and Information Collection Statement

    The following collections of information pursuant to Part 270 
contained in this proposed rulemaking are being submitted to the Office 
of Management and Budget (OMB) for review under Section 3507(d) of the 
Paperwork Reduction Act of 1995.\44\ These information collection 
requirements were previously in effect until the removal of the 
Commission regulations implementing NGPA section 503 and are now 
proposed to be reinstated.
---------------------------------------------------------------------------

    \44\ 44 U.S.C. 3507(d)
---------------------------------------------------------------------------

    Comments are solicited on the Commission's need for this 
information, whether the information will have practical utility, the 
accuracy of the provided burden estimates, ways to enhance the quality, 
utility, and clarity of the information to be collected, and any 
suggested methods for minimizing respondents' burden, including the use 
of automated information techniques. The burden estimates for complying 
with this proposed rule are as follows:
    Public Reporting Burden: Estimated Annual Burden

----------------------------------------------------------------------------------------------------------------
                                                                     Number of
                 Data collection                     Number of     responses per     Hours per     Total annual
                                                    respondents     respondent       response          hours
----------------------------------------------------------------------------------------------------------------
FERC Form 121...................................            1800               1             .25             450
FERC-568........................................            1800               1            6.01           10818
----------------------------------------------------------------------------------------------------------------

    Total Annual Hours for Collection (Reporting + Record keeping) = 
11,268.
    Based on the Commission's previous experience for processing 
applications for well determinations and completion of the FERC Form 
121, it is estimated that about 1800 filings per year will be made over 
the next three years at a burden of 6.01 hours per filing for the 
application, .25 hours per filing for the Form 121, for a total of 
11,268 hours under the proposed regulations. These two collections of 
information were eliminated after passage of the Wellhead Decontrol Act 
of 1989. The Commission is requesting that OMB reinstate these data 
collections to their inventory. The total hours associated with the 
proposed rule will be added to the total hours for the Commission's 
collections of information as well as to OMB's inventory.
    Information Collection Costs: The Commission seeks comments on the 
costs to comply with these requirements. It has projected the average 
annualized cost for all respondents to be:
    Annualized Capital/Startup Costs: $201,425.
    Annualized Costs (Operations & Maintenance) $0.00.
    Total Annualized Costs: $201,545.
    The OMB regulations require OMB to approve certain information 
collection requirements imposed by agency rule. Accordingly, pursuant 
to OMB regulations, the Commission is providing notice of its proposed 
information collections to OMB.
    Title: FERC Form 121, Application for Maximum Lawful Price under 
the Natural Gas Policy Act of 1978, FERC-568, Well Category 
Determinations.
    OMB Control No: 1902-0038 and 1902-0112.
    The applicant shall not be penalized for failure to respond to this 
collection of information unless the collection of information displays 
a valid OMB control number.
    Respondents: Business or other for profit, including small 
businesses.
    Frequency of Responses: On occasion.
    Necessity of the Information: The proposed rule reinstates the 
regulations to establish the procedures for the Commission to make 
determinations under NGPA Section 503. A determination by the 
Commission will enable producers of natural gas to claim credits for 
high cost gas as provided for by Section 29 of the Internal Revenue 
Code. The 10th Circuit held in a recent decision that a formal section 
503 determination is required to obtain the Section 29 tax credit. The 
implementation of these data requirements will help the Commission to 
carry out its responsibilities under the NGPA.
    Internal Review: The Commission has assured itself, by means of its 
internal review, that there is specific, objective support for the 
burden estimates associated with the information

[[Page 6056]]

requirements. The Commission's Office of Markets, Tariffs, and Rates 
will use the data submitted by the information collections to determine 
whether it should affirm, reverse, remand, make a preliminary finding 
on, or take no action on an initial determination by a jurisdictional 
agency. The agency's initial determination is as to whether any natural 
gas produced under extraordinary conditions in terms of risks or costs 
can be considered as ``high-cost natural gas'' under Section 107(c) of 
the NGPA. These requirements have been reinstated as a result of the 
Court's decision to require well determinations in order to obtain 
Section 29 tax credits. These tax credits are available for qualified 
fuels through January 1, 2003 unless Congress should extend the 
program. These requirements conform to the Commission's plan for 
efficient information collection and management within the natural gas 
industry.
    Interested persons may obtain information on the reporting 
requirements by contacting the following: Federal Energy Regulatory 
Commission, 888 First Street, NE Washington, DC 20426, [Attention: 
Michael Miller, Office of the Chief Information Officer, Phone: (202) 
208-1415, fax: (202) 208-2425, email: [email protected]].
    For submitting comments concerning the collection of information(s) 
and the associated burden estimate(s), please send your comments to the 
contact listed above and to the Office of Management and Budget, Office 
of Information and Regulatory Affairs, Washington, DC 20503, 
[Attention: Desk Officer for the Federal Energy Regulatory Commission, 
phone: (202) 395-3087, fax: (202) 395-7285.]

VII. Public Comment Procedures

    Prior to taking final action on this proposed rulemaking, we are 
inviting written comments from interested persons. The Commission also 
is notifying each affected State Commission and is giving reasonable 
opportunity to each State Commission to present its views for our 
consideration. All comments in response to this notice should be 
submitted to the Office of Secretary, Federal Energy Regulatory 
Commission, 888 First Street, NE, Washington, DC 20426, and should 
refer to Docket No. RM00-6-000. An original and fourteen (14) copies of 
such comments should be filed with the Commission on or before April 
10, 2000.
    In addition to filing paper copies, the Commission encourages the 
filing of comments either on computer diskette or via Internet E-Mail. 
Comments may be filed in the following formats: WordPerfect 8.0 or 
lower version, MS Word Office 97 or lower version, or ASCII format.
    For diskette filing, include the following information on the 
diskette label: Docket No. RM00-6-000; the name of the filing entity; 
the software and version used to create the file; and the name and 
telephone number of a contact person.
    For Internet E-Mail submittal, comments should be submitted to 
``[email protected]'' in the following format. On the subject 
line, specify Docket No. RM00-6-000. In the body of the E-Mail message, 
include the name of the filing entity; the software and version used to 
create the file, and the name and telephone number of the contact 
person. Attach the comments to the E-Mail in one of the formats 
specified above. The Commission will send an automatic acknowledgment 
to the sender's E-Mail address upon receipt. Questions on electronic 
filing should be directed to Brooks Carter at: 202-501-8145, E-Mail 
address: [email protected].
    Commenters should take note that, until the Commission amends its 
rules and regulations, the paper copy of the filing remains the 
official copy of the document submitted. Therefore, any discrepancies 
between the paper filing and the electronic filing or the diskette will 
be resolved by reference to the paper filing.
    All written comments will be placed in the Commission's public 
files and will be available for inspection in the Commission's Public 
Reference room at 888 First Street, NE, Washington DC 20426, during 
regular business hours. Additionally, comments may be viewed, printed 
or downloaded remotely via the Internet through FERC's Homepage using 
the RIMS or CIPS link. RIMS contains all comments but only those 
comments submitted in electronic format are available on CIPS. User 
assistance is available at 202-208-2222, or by E-Mail to 
[email protected].

List of Subjects

18 CFR Part 270

    Natural gas, Price controls, Record and recordkeeping requirements.

18 CFR Part 375

    Authority delegations (Government agencies), Seals and insignia, 
Sunshine Act.

18 CFR Part 381

    Natural gas, Reporting and recordkeeping requirements.

By direction of the Commission.
David P. Boergers,
Secretary.
    In consideration of the foregoing, the Commission proposes to amend 
Part 270, Chapter I, Title 18 of the Code of Federal Regulations, as 
follows:
    1. Part 270 is added to read as follows:

PART 270--PROCEDURES GOVERNING WELL DETERMINATIONS FOR TAX CREDIT 
PURPOSES

Subpart A--General Definitions

Sec.
Sec. 270.101  General definitions

Subpart B--Determination by Jurisdictional Agencies

Sec. 270.201  Applicability
Sec. 270.202  Definition of determination
Sec. 270.203  Determinations by jurisdictional agencies
Sec. 270.204  Notice to the Commission

Subpart C--Requirements for Filing with Jurisdictional Agencies

Sec. 270.301  General requirement
Sec. 270.302  Occluded natural gas produced from gas seams.
Sec. 270.303  Natural gas produced from Devoian Shale
Sec. 270.304  Tight formation gas
Sec. 270.306  Recompletions in Devonian Shale wells in Michigan.

Subpart D--Identification of State and Federal Jurisdictional 
Agencies

Sec. 270.401  Jurisdictional agency

Subpart E--Procedures for Commission Review of Jurisdictional 
Agency Determination

Sec. 270.501  Publication of Notice from Jurisdictional Agency
Sec. 270.502  Commission review of final determination
Sec. 270.503  Protests to the Commission
Sec. 270.504  Contents of protests to the Commission
Sec. 270.505  Procedure for reopening determinations
Sec. 270.506  Confidentiality

    Authority:  15 U.S.C. 717-717w, 3301 et. seq.; 42 U.S.C. 7101 et 
seq.; EO 12009, 3 CFR 1978 Comp., p. 142.

Subpart A--General definitions


Sec. 270.101  General definitions.   

    (a) NGPA definitions. Terms defined in the Natural Gas Policy Act 
of 1978 (NGPA) will have the same meaning for purposes of this 
subchapter as they have under the NGPA, unless further defined in this 
subchapter.
    (b) Subchapter H definitions. For purposes of this part:
    (1) NGPA means the Natural Gas Policy Act of 1978.

[[Page 6057]]

    (2) Surface location means the point on the Earth's surface from 
which drilling of a well is commenced except that in the case of a well 
drilled in permanent surface waters, the Earth's surface means the mean 
elevation of the surface of the water.
    (3) Jurisdictional agency means the state or federal agency 
identified in Subpart D of this part.
    (4) Tight formation gas means natural gas that a jurisdictional 
agency has determined to be produced from a designated tight formation.
    (5) Designated tight formation means the portion of a natural gas 
bearing formation that was:
    (i) Designated as tight formation by the Commission, pursuant to 
section 501 of the NGPA, or
    (ii) Determined to be a tight formation pursuant to section 503 of 
the NGPA.
    (6) Occluded natural gas produced from coal seams means naturally 
occurring natural gas released from entrapment from the fractures, 
pores and bedding planes of coal seams.
    (7) Natural gas produced from Devonian shale means natural gas 
produced from fractures, micropores and bedding planes of shales 
deposited during the Paleozoic Devonian Period.
    (8) Shales deposited during the Paleozoic Devonian Period can be 
defined as either:
    (i) The gross Devonian age stratigraphic interval encountered by a 
well bore, at least 95 percent of which has a gamma ray index of 0.7 or 
greater; or
    (ii) One continuous interval within the gross Devonian age 
stratigraphic interval, encountered by a well bore, as long as at least 
95 percent of the selected Devonian shale interval has a gamma ray 
index of 0.7 or greater (but if the interval selected is more than 200 
feet thick, the bottom and top 100 foot portions must meet the 5 
percent test independently).
    (9) Gamma ray index means when measuring the Devonian age 
stratigraphic interval, the gamma ray index at any point is to be 
calculated by dividing the gamma ray log value at that point by the 
gamma log value at the shale base line established over the entire 
Devonian age interval penetrated by the well bore.

Subpart B--Determinations by Jurisdictional Agencies


Sec. 270.201  Applicability.

    This part applies to determinations of jurisdictional agencies for 
tight formation gas, occluded natural gas produced from coal seams, and 
natural gas produced from Devonian shale which is produced through a 
recompletion commenced after January 1, 1993, in a well the surface 
drilling of which began after December 31, 1979, and before January 1, 
1993, where such gas could not have been produced from any completion 
location in existence in the well bore before January 1, 1993.


Sec. 270.202  Definition of determination.

    For purposes of this subpart, a determination has been made by a 
jurisdictional agency when such determination is administratively final 
before such agency.


Sec. 270.203  Determinations by jurisdictional agencies.

    A jurisdictional agency must make determinations to which this part 
applies in accordance with procedures applicable to it under the law of 
its jurisdiction for making such determinations or for making 
comparable determinations.


Sec. 270.204  Notice to the Commission.

    Within 15 days after making a determination that natural gas 
qualifies under this part, the jurisdictional agency must give written 
notice of the determination to the Commission. The notice must include 
the following:
    (a) A list of all participants in the proceeding as well as any 
persons who submitted or who sought an opportunity to submit written 
comments (whether or not such persons participated in the proceeding);
    (b) A statement indicating whether the matter was opposed before 
the jurisdictional agency;
    (c) A copy of the application together with a copy or description 
of all other materials upon which the jurisdictional agency relied in 
the course of making the determination, together with any information 
which may be inconsistent with the determination.
    (d) An explanatory statement, including appropriate factual 
findings and references, which is sufficient to enable a person 
examining the notice to ascertain the basis for the determination 
without reference to information or data not contained in the notice.

Subpart C--Requirements for Filings With Jurisdictional Agencies


Sec. 270.301  General requirements.

    (a) An application to which this subpart applies may be filed with 
the jurisdictional agency and signed by any person the jurisdictional 
agency designates as eligible to make filings with respect to the well 
for which the application is made.
    (b) The documents required by this subpart are the minimum required 
in support of a request for a determination. The jurisdictional agency 
may require additional support as it deems appropriate, and may more 
specifically identify the documents indicated as the minimum required.
    (c) Each applicant must pay the fee prescribed in Sec. 381.401 of 
this chapter. The applicant will be billed annually by the Commission 
for each jurisdictional agency determination received by the 
Commission. The applicant must submit the fee, or petition for waiver 
pursuant to Sec. 381.106, within 30 days following the billing date.


Sec. 270.302  Occluded natural gas produced from coal seams.

    A person seeking a determination that natural gas is occluded 
natural gas produced from coal seams must file an application with the 
jurisdictional agency which contains the following items:
    (a) FERC Form No. 121;
    (b) All well completion reports.
    (c) A radioactivity, electric or other log which will define the 
coal seams.
    (d) Evidence to establish that the natural gas was produced from a 
coal seam;
    (e) A statement by the applicant, under oath, that
    (1) The gas was produced from a coal seam through a recompletion 
commenced after January 1, 1993, in a well the surface drilling of 
which began after December 31, 1979 and before January 1, 1993,
    (2) Such gas could not have been produced from any completion 
location in existence in the well bore before January 1, 1993, and
    (3) The applicant has no knowledge of any information not described 
in the application which is inconsistent with his conclusion.


Sec. 270.303  Natural gas produced from Devonian shale.

    A person seeking a determination that natural gas is produced from 
Devonian shale shall file an application with the jurisdictional agency 
which contains the following items:
    (a) FERC Form No. 121;
    (b) All well completion reports;
    (c) A gamma ray log with superimposed indications of the shale base 
line and the gamma ray index of 0.7 over the Devonian age stratigraphic 
section designated pursuant to Sec. 270.101(b)(8);
    (d) A reference to a standard stratigraphic chart or text 
establishing that the producing interval is a shale of Devonian age; 
and
    (e) A sworn statement:
    (1) Calculating the percentage of footage of the producing interval 
which

[[Page 6058]]

is not Devonian shale as indicated by a Gamma ray index of less than 
0.7;
    (2) Demonstrating that the percentage of potentially disqualifying 
non-shale footage for the stratigraphic section selected is equal to or 
less than 5 percent of the Devonian stratigraphic age interval 
designated pursuant to Sec. 270.101(b)(7);
    (3) Attesting that the natural gas is being produced from Devonian 
Shale, through a recompletion commenced after December 31, 1979, in a 
well the surface drilling of which began on or after January 1, 1980 
and before January 1, 1993;
    (4) Such gas could not have been produced from any completion 
location in existence in the well bore before January 1, 1993, and
    (5) The applicant has no knowledge of any information not described 
in the application which is inconsistent with his conclusion.


Sec. 270.304  Tight formation gas.

    A person seeking a determination that natural gas is tight 
formation gas must file with the jurisdictional agency an application 
which contains the following items:
    (a) FERC Form No. 121;
    (b) All well completion reports;
    (c) A map that identifies the geographic location of the well and 
the geographic location of the post-January 1, 1993, recompletion's 
completion location in the designated tight formation, along with the 
geographic boundaries of such designated tight formation, or a location 
plat identifying the geographic location of the well and the post-
January 1, 1993 recompletion's completion location in the designated 
tight formation, along with a list of the tract (or tracts) of land 
that comprise such designated tight formation;
    (d) A complete copy of the well log, including the log heading 
identifying the designated tight formation stratigraphically; and
    (e) A statement by the applicant, under oath, that:
    (1) The natural gas is being produced from a designated tight 
formation through a recompletion commenced after January 1, 1993, in a 
well the surface drilling of which began after December 31, 1979 and 
before January 1, 1993,
    (2) Such gas could not have been produced from any completion 
location in existence in the well bore before January 1, 1993, and
    (3) The applicant has no knowledge of any information not described 
in the application which is inconsistent with his conclusion.


Sec. 270.306  Recompletions in Devonian shale wells in Michigan.

    A person seeking a determination that natural gas is being produced 
from the Devonian Age Antrim shale in Michigan shall file an 
application which contains the following items:
    (a) FERC Form No. 121;
    (b) All well completion reports;
    (c) A gamma ray log from the closest available well bore (producing 
or dry hole) that is within a one mile radius of the well for which a 
determination is sought, with superimposed indications of
    (1) The shale base line and the gamma ray index of 0.7 over the 
Devonian age stratigraphic section penetrated by the well bore; and
    (2) The boundary between the Antrim shale and the overlying 
formation (Berea Sandstone, Ellsworth, Bedford, or Sunbury shales, or 
their equivalents);
    (d) A location plat showing the well for which the determination is 
sought and the well for which a gamma ray log has been filed;
    (e) A mud log from the well for which the determination is sought, 
with a detailed description of samples taken from 10-foot, or less, 
intervals through-out the Devonian age stratigraphic section penetrated 
by the well bore;
    (f) A driller's log, or similar report, from the well for which the 
determination is sought, indicating the general characteristics of the 
strata penetrated and the corresponding depths at which they are 
encountered throughout the Devonian age stratigraphic section 
penetrated by the well bore;
    (g) A reference to a standard stratigraphic chart or text 
establishing that the producing interval is a shale of Devonian age; 
and
    (h) A sworn statement:
    (1) Calculating the percentage of footage of the producing interval 
(or the Antrim Shale in the event the well is a dry hole) in the well 
for which a gamma ray log was submitted which is not Devonian shall as 
indicated by a gamma ray index of less than 0.7;
    (2) Demonstrating that the percentage of potentially disqualifying 
non-shale footage for the Devonian age stratigraphic section penetrated 
by the well bore for which the submitted gamma ray log is equal to or 
less than 5 percent;
    (3) Attesting that the natural gas is being produced from the 
Devonian Age Antrim Shale, through a recompletion commenced after 
January 1, 1993, in a well the surface drilling of which began after 
December 31, 1979 and before January 1, 1993;
    (4) Such gas could not have been produced from any completion 
location in existence in the well bore before January 1, 1993, and
    (5) Declaring that the applicant has no knowledge of any 
information not described in the application which is inconsistent with 
these conclusions.

Subpart D--Identification of State and Federal Jurisdictional 
Agencies


Sec. 270.401  Jurisdictional agency.

    (a) Definition. With respect to a well the surface location of 
which is on lands within the boundaries of a State (including Federal 
lands and offshore State lands), ``jurisdictional agency'' means the 
Federal or State agency having regulatory jurisdiction with respect to 
the production of natural gas.
    (b) The jurisdictional agency for wells located on Federal lands in 
each state are:
    (1) Alabama--Chief, Branch of Fluid and Solid Minerals, Bureau of 
Land Management, Eastern States Office (972), 350 South Pickett Street, 
Alexandria, VA 22304.
    (2) Alaska, Anchorage District--Assistant District Manager for 
Mineral Resources, Bureau of Land Management, 4700 East 72nd Avenue, 
Anchorage, AK 99507.
    Alaska, Fairbanks District--Assistant District Manager for Mineral 
Resources, Bureau of Land Management, North Post Fort Wainwright, Box 
1150, Fairbanks, AK 99707.
    (3) Arizona, except for the Navaho and Hopi Indian Reservations `` 
Deputy State Director for Mineral Resources, Bureau of Land Management, 
P.O. Box 16563, Phoenix, AZ 85011.
    Arizona, Navaho and Hopi Indian Reservations `` District Manager, 
Bureau of Land Management, Albuquerque District Office (NGPA), 435 
Montano Road, NE., Albuquerque, NM 87107.
    (4) Arkansas--Chief, Branch of Fluid and Solid Minerals, Bureau of 
Land Management, Eastern States Office (972), 350 South Pickett Street, 
Alexandria, VA 22304.
    (5) California, except Naval Petroleum Reserve No. 1 (Elk Hills) 
and No. 2 (Buena Vista)--Chief, Branch of Fluid and Solid Minerals, 
Bureau of Land Management, Division of Mineral Resources (C-920), 2800 
Cottage Way, Room E-1827, Sacramento, CA 95825.
    (6) Colorado--Deputy State Director for Mineral Resources, Bureau 
of Land Management, Colorado State Office (CO-920), 2850 Youngfield 
Street, Lakewood, CO 80215.
    (7) Florida and Georgia--Chief, Branch of Fluid and Solid Minerals, 
Bureau of Land Management, Eastern

[[Page 6059]]

States Office (972), 350 South Pickett Street, Alexandria, VA 22304.
    (8) Idaho--Deputy State Director for Mineral Resources, Bureau of 
Land Management, Idaho State Office (920), 3380 Americana Terrace, 
Boise, ID 83706.
    (9) Illinois, Indiana, and Iowa--Chief, Branch of Fluid and Solid 
Minerals, Bureau of Land Management, Eastern States Office (972), 350 
South Pickett Street, Alexandria, VA 22304.
    (10) Kansas--Deputy State Director for Mineral Resources, Bureau of 
Land Management, Colorado State Office (CO-920), 2850 Youngfield 
Street, Lakewood, CO 80215.
    (11) Kentucky, Louisiana, Maryland, Michigan, Mississippi, and 
Missouri--Chief, Branch of Fluid and Solid Minerals, Bureau of Land 
Management, Eastern States Office (972), 350 South Pickett Street, 
Alexandria, VA 22304.
    (12) Montana--Chief, Branch of Fluid and Solid Minerals, Bureau of 
Land Management, Division of Mineral Resources, P.O. Box 36800, 
Billings, MT 59107.
    (13) Nebraska--Chief, Branch of Fluid and Solid Minerals, Bureau of 
Land Management, Eastern States Office (972), 350 South Pickett Street, 
Alexandria, VA 22304.
    (14) Nevada--State Director, Bureau of Land Management, Nevada 
StateOffice (NV-920), 300 Booth Street, Reno, NV 89520.
    (15) New Mexico, Northern New Mexico--District Manager, Bureau of 
Land Management, Albuquerque District Office (NGPA), 435 Montano Road, 
NE., Albuquerque, NM 87107.
    New Mexico, Southern New Mexico--District Manager, Bureau of Land 
Management, Roswell District Office (NGPA), P.O. Box 1397, Roswell, NM 
88201.
    (16) New York and North Carolina--Chief, Branch of Fluid and Solid 
Minerals, Bureau of Land Management, Eastern States Office (972), 350 
South Pickett Street, Alexandria, VA 22304.
    (17) North Dakota--Chief, Branch of Fluid Minerals, Bureau of Land 
Management Division of Mineral Resources, P.O. Box 36800, Billings, MT 
59107.
    (18) Ohio--Chief, Branch of Fluid and Solid Minerals, Bureau of 
Land Management, Eastern States Office (972), 350 South Pickett Street, 
Alexandria, VA 22304.
    (19) Oklahoma, except the Osage Reservation--District Manager, 
Bureau of Land Management, Tulsa District Office (NGPA), 6136 East 32nd 
Place, Tulsa, OK 74135.
    Oklahoma, the Osage Reservation only--Superintendent, Osage Indian 
Agency, Bureau of Indian Affairs, U. S. Department of the Interior, 
Pawhuska, OK 74056.
    (20) Oregon--Deputy State Director for Mineral Resources, Bureau of 
Land Management, Oregon State Office, P.O. Box 2965 Portland, OR 97208.
    (21) Pennsylvania and South Carolina--Chief, Branch of Fluid and 
Solid Minerals, Bureau of Land Management, Eastern States Office (972), 
350 South Pickett Street, Alexandria, VA 22304.
    (22) South Dakota--Chief, Branch of Fluid Minerals, Bureau of Land 
Management, Division of Mineral Resources, P.O. Box 36800 Billings, MT 
59107.
    (23) Tennessee--Chief, Branch of Fluid and Solid Minerals, Bureau 
of Land Management, Eastern States Office (972), 350 South Pickett 
Street, Alexandria, VA 22304.
    (24) Texas, east of the 100th Meridian--District Manager, Bureau of 
Land Management, Tulsa District Office (NGPA), 6136 East 32nd Place, 
Tulsa, OK 74135.
    Texas, west of the 100th Meridian--District Manager, Bureau of Land 
Management, Roswell District Office (NGPA), P.O. Box 1397, Roswell, NM 
88201.
    (25) Utah, except for the Navajo and Hopi Indian Reservations--
Chief, Branch of Fluid Minerals, Bureau of Land Management, Utah State 
Office (U-922), 324 South State Street, Suite 301, Salt Lake City, UT 
84111.
    Utah, the Navajo and Hopi Indian Reservations only--District 
Manager, Bureau of Land Management, Albuquerque District Office (NGPA), 
435 Montano Road, NE., Albuquerque, NM 87107.
    (26) Virginia--Chief, Branch of Fluid and Solid Minerals, Bureau of 
Land Management, Eastern States Office (972), 350 South Pickett Street, 
Alexandria, VA 22304.
    (27) Washington--Deputy State Director for Mineral Resources, 
Bureau of Land Management, Oregon State Office, P.O. Box 2965, 
Portland, OR 97208.
    (28) West Virginia--Chief, Branch of Fluid and Solid Minerals, 
Bureau of Land Management, Eastern States Office (972), 350 South 
Pickett Street, Alexandria, VA 22304.
    (29) Wyoming, excluding Naval Petroleum Reserve No. 3 (Teapot 
Dome)--Casper District * * * District Manager, Bureau of Land 
Management, 1701 East E Street, Casper, WY 82601.
    Rawlins District * * * District Manager, Bureau of Land Management, 
P.O. Box 670, Rawlins, WY 82301.
    Rock Springs District * * * District Manager, Bureau of Land 
Management, P.O. Box 1869, Rock Springs, WY 82902.
    Worland District * * * District Manager, Bureau of Land Management, 
P.O. Box 119, Worland, WY 82401.
    (c) The jurisdictional agency for wells located on Other lands in 
each state are:
    (1) Alabama--State Oil and Gas Board, P.O. Box O, Tuscaloosa, AL 
35486-9780.
    (2) Alaska--Department of Natural Resources, Oil & Gas Division, 
550 West 7th Avenue, Anchorage, AK 99501.
    (3) Arizona--Oil and Gas Conservation Commission, 416 West Congress 
Street, Suite 100, Tucson, AZ 85701
    (4) Arkansas--Oil & Gas Commission, P.O. Box 1472, El Dorado, AR 
71730-1472.
    (5) California--Department of Conservation, Division of Oil & Gas, 
801 K Street, MS24-01, Sacramento, CA 95814.
    (6) Colorado--Oil & Gas Conservation Commission, Chancery Building 
1120 Lincoln, #801, Denver, CO 80203.
    (7) Florida--Administrator Oil and Gas, Bureau of Geology, 
Department of Natural Resources, 903 West Tennessee Street, 
Tallahassee, FL 32304.
    (8) Georgia--Department of Natural Resources, Geologic & Water 
Resources Division, 19 Martin Luther King Drive, SW., Atlanta, GA 
30334.
    (9) Idaho--Idaho Public Utilities Commission, Statehouse Mail, 
Boise, ID 83720.
    (10) Illinois--Department of Natural Resources, Office of Oil & Gas 
Division, 524 South 2nd Street, Springfield, IL 62701.
    (11) Indiana--Department of Natural Resources, Oil & Gas Division, 
402 West Washington Street, Room 256, Indianapolis, IN 46204.
    (12) Kansas--Kansas Corporation Commission, 1500 SW Arrowhead Road, 
Topeka, KS 66604
    (13) Kentucky Natural Resources Department, 663 Teton Trail, 
Frankfort, KY 40601.
    (14) Louisiana--Department of Natural Resources Conservation, P.O. 
Box 94275, Baton Rouge, LA 70804.
    (15) Maryland--Department of Natural Resources, Tawes State Office 
Building, Annapolis, MD 21404.
    (16) Michigan--Department of Natural Resources, Box 30028, Lansing 
MI 48909.
    (17) Mississippi--State Oil & Gas Board, 500 Graymont Avenue, Suite 
E, Jackson, MS 39202.
    (18) Missouri--Department of Natural Resources Geology and Survey 
Division, P.O. Box 250, 111 Fairgrounds Road, Rolla, MO 65402.

[[Page 6060]]

    (19) Montana--Department of Natural Resources and Oil and Gas 
Conservation Division, 2535 St. John's Avenue, Billings, MT 59102.
    (20) Nebraska--Oil & Gas Conservation Commission, Box 399, Sidney, 
NE 69162.
    (21) Nevada--Department of Conservation and Natural Resources, 
Division of Mineral Resources, Capitol Complex, 201 S. Fall Street, 
Carson City, NV 89710.
    (22) New Mexico--Department of Energy and Minerals and Natural 
Resources, Oil Conservation Division, 2040 S. Pacheco Street, Sante Fe, 
NM 87505.
    (23) New York--Department of Environmental Conservation, Division 
of Mineral Resources, 50 Wolf Road, Albany, NY 12233.
    (24) North Carolina--Department of Natural Resources and Community 
Development, 512 North Salisbury Street, Raleigh, NC 27611.
    (25) North Dakota--Industrial Commission, State Capitol, 600 East 
Boulevard Avenue, Department 405, Bismarck, ND 58505.
    (26) Ohio--Department of Natural Resources, Division of Oil and 
Gas, 1930 Belcher Drive, Building D-3, Columbus, OH 43224.
    (27) Oklahoma--Corporation Commission, Oil & Gas Conservation 
Division, P.O. Box 52000, Oklahoma City, OK 73152-2000.
    (28) Oregon--Department of Geology & Mineral Industries, 800 N.E. 
Oregon Street, #28 Portland, OR 97232.
    (29) Pennsylvania--Department of Conservation and Natural 
Resources, P.O. Box 8767, Harrisburg, PA 17105-8767.
    (30) South Carolina--South Carolina Public Service Commission, P.O. 
Drawer 11649, Columbia, SC 29211.
    (31) South Dakota--Department of Environment and Natural Resources, 
Foss Building, 523 East Capitol Avenue, Pierre, SD 57501.
    (32) Tennessee--Office of Conservation, Division of Geology, 401 
Church Street, Nashville, TN 37243.
    (33) Texas--Railroad Commission Oil and Gas Division, P.O. Box 
12967, Austin, TX 78711.
    (34) Utah--Department of Natrual Resources, Division of Oil, Gas 
and Mining, P.O. Box 145801 West North Temple, Suite 1210, Salt Lake 
City, UT 84114-5801.
    (35) Virginia--Department of Mines, Minerals & Energy, Division of 
Mines and Quarries, Oil & Gas Section, P.O. Box 1416, Abingdon, VA 
24210.
    (36) Washington--Department of Natural Resources, Geology and Earth 
Resources Division, P.O. Box 47001, Olympia, WA 98504.
    (37) West Virginia--Commerce Bureau, Geological and Economic 
Survey, Oil and Gas Section, P.O. Box 879, Morgantown, WV 26507.
    (d) Federal lands. For purposes of this section, ``Federal lands'' 
means
    (1) All lands leased under:
    (i) The Mineral Lands Leasing Act, as amended, 30 U.S.C. 181 et 
seq.; and
    (ii) The Mineral Leasing Act for Acquired Lands, as amended, 30 
U.S.C. 351 et seq.; and
    (2) All Indian lands which are under the supervision of the United 
States Geological Survey or any successor federal agency (30 CFR Part 
221); and
    (3) All Indian lands which are under the supervision of the Osage 
Indian Agency, Bureau of Indian Affairs, U.S. Department of the 
Interior.
    (e) Divided-interest leases. Unless an agreement under this 
paragraph provides otherwise, where a well is located on a divided-
interest lease involving Federal (or Indian) and private (or State) 
ownership:
    (1) The Federal jurisdictional agency will make the determination 
where the majority lease interest is Federal (or Indian);
    (2) The State jurisdictional agency will make the determination 
where the majority lease interest is private (or State); and
    (3) The State jurisdictional agency will make the determination 
where the lease is divided equally.
    (f) Drilling units. Unless an agreement under paragraph (e) of this 
section provides otherwise, where a drilling unit is drained by two or 
more wells, the Federal jurisdictional agency will make the 
determination if the completion location of the well in question is 
located on a Federal (or Indian) lease, and the State jurisdictional 
agency will make the determination if the completion location of the 
well in question is located on a private (or State) lease.
    (g) Agreements. If a jurisdictional agency that has jurisdiction 
over Federal lands enters into an agreement with a jurisdictional 
agency that has jurisdiction over State lands that either authorizes 
the State jurisdictional agency to make determinations for wells 
located on Federal lands or the Federal agency to make determinations 
for wells located on State lands, such agreement shall be filed with 
the Commission. Upon the filing of such an agreement, the agency so 
authorized will be considered to be the jurisdictional agency for wells 
on the lands subject to the agreement.

Subpart E--Procedures for Commission Review of Jurisdictional 
Agency Determinations


Sec. 270.501  Publication of notice from jurisdictional agency.

    (a) Upon receipt of notice of determination by a jurisdictional 
agency under Sec. 270.204, the Commission will send an acknowledgment 
to the applicant and will post acknowledgment in the Commission's 
Public Reference Room and on the Commission's web site. Another source 
of the information is the Commission's copy contractor, RVJ 
International, Inc. RVJ International, Inc. is located in the Public 
Reference Room at 888 First Street, NE, Washington, DC 20426.
    (b) The acknowledgment will contain the following:
    (1) The date on which the jurisdictional agency notice was 
received;
    (2) Certain information contained in FERC Form No. 121;
    (3) A statement that the application and a copy or description of 
other materials in the record on which such determination was made is 
available for inspection, except to the extent the material is treated 
as confidential under Sec. 270.506, at the offices of the Commission; 
and
    (4) A statement that persons objecting to the final determination 
may, in accordance with this subpart, file a protest with the 
Commission within 20 days after the date that notice of receipt of a 
determination is issued by the Commission pursuant to this section.


Sec. 270.502  Commission review of final determinations.

    (a) Review by Commission. Except as provided in paragraphs (b), (c) 
and (d) of this section, a determination submitted to the Commission by 
a jurisdictional agency will become final 45 days after the date on 
which the Commission received notice of the determination, unless 
within the 45 day period, the Commission:
    (1) Makes a preliminary finding that:
    (i) The determination is not supported by substantial evidence in 
the record on which the determination was made; or
    (ii) The determination is not consistent with information which is 
contained in the public records of the Commission and which was not 
part of the record on which the jurisdictional agency made the 
determination, and
    (2) Issues written notice of such preliminary finding, including 
the reasons for the preliminary finding. Copies of the written notice 
will be sent to the jurisdictional agency which made the determination, 
to the persons

[[Page 6061]]

identified in the notice under Sec. 270.204 of such determination, and 
to any persons who have filed a protest.
    (b) Incomplete notice. Notwithstanding the provisions of paragraph 
(a) of this section, the 45-day period for Commission review of a 
determination will not begin if:
    (1) The notice forwarded to the Commission pursuant to Sec. 270.204 
does not contain all the material specified therein; and
    (2) The Commission notifies the jurisdictional agency, within 45 
days after the date on which the Commission receives notice of the 
determination, that the notice is incomplete.
    (c) Withdrawal of notice. (1) The jurisdictional agency may 
withdraw a notice of determination by giving notice as specified in 
paragraph (c)(2) of this section at any time prior to the issuance of a 
final order with respect to such determination under paragraphs (g)(1) 
and (g)(2) of this section, or at any time prior to the date such 
determination becomes final under paragraphs (a) or (g)(4) of this 
section. Such notice must include the jurisdictional agency's reasons 
for the withdrawal.
    (2) Withdrawal of a notice of determination will take effect at 
such time as the jurisdictional agency has notified the Commission, and 
the parties to the proceeding before the agency, of such withdrawal.
    (3) Withdrawal of a notice of determination shall nullify such 
notice of determination.
    (d) Withdrawal of application. (1) An applicant may withdraw an 
application for a determination which is before the Commission by 
giving notice as specified in paragraph (d)(2) of this section at any 
time prior to the issuance of a final order with respect to such 
determination under paragraphs (g)(1) and (g)(2) of this section, or at 
any time prior to the date such determination becomes final under 
paragraphs (a) or (g)(4) of this section.
    (2) Withdrawal of an application will take effect at such time as 
the applicant has notified the Commission and the jurisdictional 
agency.
    (3) Withdrawal of an application will nullify such application and 
the notice of determination on such application.
    (e) Public notice. The Commission will publish notice of the 
preliminary finding in the Federal Register and will post the notice in 
its Public Reference Room. The notice will set forth the reasons for 
the preliminary finding.
    (f) Procedures following notice of preliminary finding. Any state 
or federal agency or any person may submit, within 30 days after 
issuance of the preliminary finding, written comments, and request an 
informal conference with the Commission staff. Any jurisdictional 
agency, any state agency and any person receiving notice under 
paragraph (a)(2) of this Section may request an informal conference 
with the Commission staff. All timely requests for conferences will be 
granted. Notice of, and permission to attend, such conferences will be 
given to persons identified in paragraph (a)(2) of this section and to 
state or federal agencies or persons who submitted comments under this 
paragraph.
    (g) Final orders. (1) In any case in which a protest was filed with 
the Commission pursuant to this subpart and a preliminary finding was 
issued, the Commission will issue a final order within 120 days after 
issuance of the preliminary finding.
    (2) In any case in which no protest was filed with the Commission 
pursuant to this subpart, and a preliminary finding was issued, the 
Commission may issue a final order within 120 days after issuance of 
the preliminary finding.
    (3) A final order issued under paragraphs (g)(1) or (g)(2) will 
either affirm, reverse, or remand the determination of the 
jurisdictional agency. Such order will state the specific basis for the 
Commission's action. Notice of the issuance of such order will be given 
to the jurisdictional agency, to participants in the proceeding before 
the jurisdictional agency, and to participants in the proceeding before 
the Commission under paragraph (d) of this section and under 
Sec. 270.503.
    (4) In the event that the Commission fails to issue a final order 
within 120 days after issuance of the preliminary finding, the 
determination of the jurisdictional agency shall become final.


Sec. 270.503  Protests to the Commission.

    (a) Who may file. Any person may file a protest with the Commission 
with respect to a determination of a jurisdictional agency within 20 
days after the date that notice of receipt of a determination is issued 
by the Commission pursuant to Sec. 270.204.
    (b) Grounds. Protests may be based only on the grounds that the 
final determination is:
    (1) Not supported by substantial evidence;
    (2) Not consistent with information which is contained in the 
public records of the Commission and which was not part of the record 
on which the determination was made;
    (3) Not consistent with information submitted with the protests for 
inclusion in the public records of the Commission, which information 
was not part of the record on which the determination was made; or
    (4) Not based on an application which complied with the filing 
requirements set forth in this subpart.


Sec. 270.504  Contents of protests to the Commission.

    Each protest must include:
    (a) An identification of the determination protested;
    (b) The name and address of the person filing the protest;
    (c) A statement of whether or not the person filing the protest 
participated in the proceeding before the jurisdictional agency, and if 
not, the reason for the nonparticipation;
    (d) A statement of the effect the determination will have on the 
protestor;
    (e) A statement of the precise grounds under Sec. 270.503(f) for 
the protest, and all supporting documents or references to any 
information relied on which is in the record on which the determination 
is based or is in or to be inserted in the public files of the 
Commission; and
    (f) A statement that the protestor has served, in accordance with 
Sec. 385.2010 of this chapter, a copy of the protest together with all 
supporting documents on the jurisdictional agency and all persons 
listed in the notice of determination filed pursuant to Sec. 270.204.


Sec. 270.505  Procedure for reopening determinations.

    (a) Grounds. At any time subsequent to the time a determination 
becomes final pursuant to this subpart, the Commission, on its own 
motion, or in response to a petition filed by any person aggrieved or 
adversely affected by the determination, may reopen the determination 
if it appears that:
    (1) In making the determination, the Commission or the 
jurisdictional agency relied on any untrue statement of material fact; 
or
    (2) There was omitted a statement of material fact necessary in 
order to make the statements made not misleading, in light of the 
circumstances under which they were made to the jurisdictional agency 
or the Commission.
    (b) Contents of petition. A petition to reopen the determination 
proceedings must contain the following information, under oath:
    (1) The name and address of the person filing the petition;
    (2) The interest of the petitioner in the outcome of the 
determination proceeding;
    (3) The statement of material fact that is alleged to be untrue or 
omitted;
    (4) A statement explaining why the outcome of the determination

[[Page 6062]]

proceeding would have been different had the statement or omission not 
occurred; and
    (5) Copies of all documents relied on by the petitioner, or 
references to such documents if they are contained in the public files 
of the commission.
    (c) Procedures after reopening. In the event the Commission reopens 
a determination pursuant to this section it will:
    (1) Give notice to the jurisdictional agency and all persons who 
participated before both that agency and the Commission in the 
proceedings resulting in the determination in question;
    (2) Permit the jurisdictional agency and other persons receiving 
notice pursuant to paragraph (C)(1) of this section to submit whatever 
documentary evidence such agency or persons deem relevant; and
    (3) Take such other action or hold or cause to be held such 
proceedings as it deems necessary or appropriate for a full disclosure 
of the facts.
    (d) Final order of Commission. Within 150 days after issuance of 
the notice under paragraph (c)(1) of this section, the Commission shall 
issue a final order. If the Commission finds that the grounds referred 
to in paragraph (a) of this section exist, it will vacate the 
determination.


Sec. 270.506  Confidentiality.

    (a) Except as provided in paragraph (b) of this section, the 
Commission will accord confidential protection to, and not disclose to 
the public, any information submitted by a jurisdictional agency under 
Sec. 270.204, if:
    (1) The jurisdictional agency, on its own motion or on request of 
the applicant, afforded such information confidential treatment before 
the jurisdictional agency; and
    (2) The agency order or the applicant's request stated grounds for 
confidential treatment which fall within one of the exemptions 
described in paragraphs (1) through (9) of 5 U.S.C. 552(b).
    (b) Upon receipt of a request for disclosure of information treated 
as confidential under paragraph (a), the Commission will determine in 
accordance with 5 U.S.C. 552 whether the information is exempt. 5 
U.S.C. 552(b). If it determines the information is not exempt, the 
information will be made public. If it determines the information is 
exempt, the Commission will not make it public unless it determines 
that its conduct of the proceeding to review the jurisdictional agency 
determination requires making such information available to the public 
or to particular parties, subject to conditions (including a protective 
order) as the Commission may prescribe. Before making any information 
public under this paragraph, the Commission will provide at least 5 
days notice to the person who submitted the information.

PART 375--THE COMMISSION

    3. The authority citation for part 375 continues to read as 
follows:

    Authority:  5 U.S.C. 551-557; 15 U.S.C. 717-717w, 3301-3432; 16 
U.S.C. 791-825r, 2601-2645; 42 U.S.C. 7101-7352.

    4. Sec. 375.307 paragraph (p) is added to read as follows:

Sec. 375.307  Delegation to the Director of the Office of Markets, 
Tariffs, and Rates

* * * * *
    (p) Take the following actions under the Natural Gas Policy Act of 
1978:
    (1) Notify jurisdictional agencies within 45 days after the date on 
which the Commission receives notice of a determination pursuant to 
Sec. 270.502(b) of this chapter that the notice is incomplete under 
Sec. 270.204 of this chapter.
    (2) Issue preliminary findings under Sec. 270.502(a)(1) of this 
chapter.

PART 381--FEES

Subpart D--Fees Applicable to the Natural Gas Policy Act of 1978

    5. The authority citation for part 381 will continue to read as 
follows:

    Authority: 15 U.S.C. 717-717W; 16 U.S.C. 791-828c, 2601-2645; 31 
U.S.C. 9701; 42 U.S.C. 7101-7352; 49 U.S.C. 60502; 49 App. U.S.C. 1-
85.

    6. Section 381.401 is added to read as follows:


Sec. 381.401  Review of jurisdictional agency determinations

    The fee established for review of a jurisdictional agency 
determination is $115. The fee must be submitted in accordance with 
subpart A of this part and Sec. 270.301(c) of this chapter.

    Note:   The following form will not appear in the Code of 
Federal Regulations.

Attachment--Federal Energy Regulatory Commission Form No. 121 
Application for Well Category Determination

1.0  API well number for this well (14 digits maximum. If no API 
number assigned, leave blank.): ________-______-__________-
__________
2.0  Section 107 determination being sought (check one) is for gas 
produced from:
____(1) coal seams;
____(2) Devonian shale; or
____(3) a designated tight formation.
3.0  Spud date of this well:
____/____/____ (month/day/year)
4.0  Recompletion commenced: ____/____/____ (month/day/year)
5.0  Measured depth of recompletion: from
__________ (top and base, in feet)
6.0  Applicant's name, address and zip code:
  Name*----------------------------------------------------------------
  Street*--------------------------------------------------------------
  City*----------------------------------------------------------------
  State----------------------------------------------------------------
  Zip Code-------------------------------------------------------------
7.0  Name and identification number of this well, name of reservoir 
into which well has been recompleted, and location of this well:
  Well*----------------------------------------------------------------
  Reservoir*-----------------------------------------------------------
  Field*---------------------------------------------------------------
  County*--------------------------------------------------------------
  State*---------------------------------------------------------------
8.0  If applying for determination on a recompletion into a 
designated tight formation, provide designated tight formation's 
name and corresponding FERC Designation:
  Formation*-----------------------------------------------------------
  FERC-----------------------------------------------------------------
  Designation*---------------------------------------------------------
9.0  Person responsible for this application:
  Name*----------------------------------------------------------------
  Title*---------------------------------------------------------------
  Signature------------------------------------------------------------
  Phone No.------------------------------------------------------------
*Signifies that line entry may contain up to 35 letters and/or 
numbers.
[FR Doc. 00-2367 Filed 2-7-00; 8:45 am]
BILLING CODE 6717-01-P