[Federal Register Volume 66, Number 69 (Tuesday, April 10, 2001)]
[Rules and Regulations]
[Pages 18569-18570]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-8852]


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DEPARTMENT OF THE INTERIOR

Bureau of Land Management

43 CFR Part 3160

[WO-310-1310-01-24 1A-PB]
RIN 1004-AC54


Oil and Gas Leasing: Onshore Oil and Gas Operations

AGENCY: Bureau of Land Management, Interior.

ACTION: Final rule; partial further delay of effective date and request 
for comments.

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SUMMARY: In accordance with the memorandum of January 20, 2001, from 
the Assistant to the President and Chief of Staff, entitled 
``Regulatory Review Plan,'' 66 FR 7701 (January 24, 2001), the Bureau 
of Land Management (BLM) temporarily delayed for 60 days until April 
10, 2001, the effective date of the rule entitled ``Oil and Gas 
Leasing: Onshore Oil and Gas Operations,'' published in the Federal 
Register on January 10, 2001 (66 FR 1883). This action partially delays 
the April 10, 2001, effective date published in the Federal Register on 
February 8, 2001 (66 FR 9527), by delaying the effective date for 120 
days of 43 CFR 3162.2-7 of the final rule. It also delays for 120 days 
removal of current 43 CFR 3162.2(a). We do so in order to seek further 
public comments.

DATES: The effective date for removal of 43 CFR 3162.2(a) and the 
addition of 43 CFR 3162.2-7, originally published in the Federal 
Register on January 10, 2001 (66 FR 1892-1893), delayed until April 10, 
2001, in the Federal Register on February 8, 2001 (66 FR 9527), is 
further delayed for 120 days until August 8, 2001, for the purpose of 
seeking further public comments. You may submit comments on or before 
June 11, 2001.

ADDRESSES: If you wish to comment, you may submit comments by any one 
of these methods:
    (1) You may mail comments to the Bureau of Land Management, 
Administrative Record, 1849 ``C'' Street, NW, Room 401LS, Washington, 
D.C. 20240.
    (2) You may deliver comments to Room 401, 1620 L Street, NW, 
Washington, D.C. 20036.
    (3) You may also comment via the Internet to [email protected]. 
Please submit comments as an ASCII file avoiding the use of special 
characters and any form of encryption. Please also include ``ATTN: 
AC54'' and your name and return address in your Internet message. If 
you do not receive a confirmation from the system that we have received 
your Internet message, contact us directly at (202) 452-5030.

FOR FURTHER INFORMATION CONTACT: Donnie Shaw, Fluid Minerals Group, 
Bureau of Land Management, Mail Stop 401LS, 1849 ``C'' Street, NW, 
Washington, D.C. 20240; telephone (202) 452-0382 (Commercial or FTS). 
Persons who use a telecommunications device for the deaf (TDD) may call 
the Federal Information Relay Service (FIRS) at 1-800-877-8330, 24 
hours a day, seven days a week, except holidays, for assistance in 
reaching Mr. Shaw.

SUPPLEMENTARY INFORMATION: To the extent that 5 U.S.C. 553 applies to 
this action, the action is exempt from notice and comment because it 
constitutes a rule of procedure under 5 U.S.C. 553(b)(A). 
Alternatively, the Department's implementation of this action without 
opportunity for public comment, effective immediately upon publication 
today in the Federal Register, is based on the good cause exceptions in 
5 U.S.C. 553(b)(3)(B) and 553(d)(3), in that seeking public comment is 
impractical, unnecessary and contrary to the public interest inasmuch 
as it cannot be accomplished before April 10, 2001. However, the 
Department is seeking public comment on whether further rulemaking to 
modify the promulgated rule is needed. The effective date was delayed 
for 60 days with a new effective date of April 10, 2001, to give 
Department officials the opportunity for further review and 
consideration of new regulations, consistent with the Assistant to the 
President's memorandum of January 20, 2001. The Department is further 
delaying the effective date of two discrete provisions to permit 
further review, consideration, and public comments on the addition of 
Sec. 3162.2-7 published on January 10, 2001. The provisions of 
Sec. 3162.2-7, concerning the joint and several liability of multiple 
lessees or operating rights owners for drainage protection, including 
compensatory royalties, were the subject of intense debate during the 
notice and comment period on this rule. The BLM is delaying the 
effectiveness of this provision, and retaining in effect for another 
120 days the current provision of Sec. 3162.2(a) concerning the duty of 
operating rights owners to protect the lessor against drainage, in 
order to consider further comments on these issues from the regulated 
industry, Indian mineral owners, State, local and Tribal governments, 
and members of the general public.
    Commenters raised a serious legal issue as to the compatibility of 
the joint and several provisions of Sec. 3162.2-7 with provisions of 
the Royalty Simplification and Fairness Act. The Secretary wants to 
permit the public an opportunity to present more extensive legal 
argument as to whether it is correct to interpret the Royalty 
Simplification and Fairness Act to not apply to compensatory royalty 
payments because they are not royalties or payment obligations, but 
damages for nonperformance of an obligation to drill a protective well. 
See the legal analysis at 63 FR 1937 and 66 FR 1886.
    We particularly encourage the public to respond to the following 
questions:
    1. Should the obligation to drill a protective well be considered a 
joint and several liability of the holders of operating rights? If the 
duty to drill a protective well is not joint and several, what 
proportion of the interest holders in the lease must be unable or 
unwilling to contribute to the cost of the well to justify a refusal of 
the operator or operating rights owner to drill a protective well?
    2. If the obligation to drill a protective well is joint and 
several among operating rights owners, does BLM's acceptance of 
compensatory royalties in satisfaction of that obligation convert the 
obligation into a ``payment obligation'' owed pro rata under the 
Royalty Simplification and Fairness Act? Was the Royalty Simplification 
and Fairness Act intended to cover compensatory royalty payments?
    3. If one or more parties who hold undivided interest in the record 
title or operating rights for the same lease do not exercise due 
diligence in fulfilling its share of drainage obligations for that 
lease, who should be responsible for compensating the Government for 
those unfulfilled obligations?
    4. Does the treatment of the drainage protection obligation as a 
joint and several obligation affect the willingness of investors to 
acquire operating rights interests in a lease? Does it affect the 
willingness of lessees to retain an interest in record title when 
transferring operating rights to another party?
    5. Does the classification of the drainage obligation as joint and 
several, or proportionate to interest, depend on

[[Page 18570]]

whether it involves an Indian lease rather than a Federal lease? Can 
BLM adopt a rule, consistent with the Secretary's trust 
responsibilities, under which an Indian mineral lessor receives less 
than full compensation for the royalty value of oil and gas drained 
without a protective well being drilled pursuant to the terms of the 
lease, because some interests in the lease are held by persons who are 
insolvent or otherwise do not contribute toward the compensation?
    6. What provisions would you suggest concerning record title owner 
and operating rights owner lease liability to protect the public 
interest?

    Dated: April 5, 2001.
Piet deWitt,
Acting Assistant Secretary, Land and Minerals Management.
[FR Doc. 01-8852 Filed 4-9-01; 8:45 am]
BILLING CODE 4310-84-P