[Federal Register Volume 66, Number 101 (Thursday, May 24, 2001)]
[Rules and Regulations]
[Pages 28655-28657]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-13118]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 208

RIN 1010-AC70


Small Refiner Administrative Fee

AGENCY: Minerals Management Service, Interior.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Minerals Management Service (MMS) is eliminating the cost 
recovery fees it charges small refiners to participate in the Small 
Refiner Royalty-in-Kind (RIK) Program. MMS believes these fees are no 
longer justified under the requirements of the Office of Management and 
Budget (OMB) Circular No. A-25.

EFFECTIVE DATE: This rule is effective June 25, 2001.

FOR FURTHER INFORMATION CONTACT: Paul A. Knueven, Chief, Regulations 
and FOIA Team, Minerals Management Service, Minerals Revenue 
Management, P.O. Box 25165, MS 320B2, Denver, Colorado 80225-0165; 
telephone (303)

[[Page 28656]]

231-3151; FAX (303) 231-3385; e-mail [email protected].

SUPPLEMENTARY INFORMATION: The principal authors of this final rule are 
Larry Cobb, Royalty in Kind, Minerals Revenue Management, MMS, and 
Sarah L. Inderbitzin of the Office of the Solicitor, Department of the 
Interior.

I. Background

    On September 26, 2000, MMS published a proposed rulemaking in the 
Federal Register (65 FR 57771) in which we proposed to remove the 
regulatory requirement to charge small refiners a fee to recover the 
costs of administering the small refiner RIK program (30 CFR 
208.4(b)(4)). We reasoned that because of new competitive procedures 
for selling RIK oil, MMS receives market value for the oil. When the 
Government sells personal property under business-type conditions, user 
charges are based on market price and yield net revenues above the 
bureau's costs. Consequently, MMS is in compliance with the 
requirements in OMB Circular A-25 and does not need to assess a 
separate cost recovery fee for the small refiner RIK program.
    MMS received one comment in response to our proposed rulemaking. A 
major oil company asked us to address an apparent inconsistency between 
language in the proposed rulemaking and the general provisions of the 
recently-promulgated Federal crude oil royalty valuation rule (65 FR 
14022, March 15, 2000). The comment quoted a sentence from the proposed 
rulemaking: ``The market-based prices are applicable spot market 
prices, with appropriate location, quality, and market-value 
adjustments for a particular area.'' (65 FR at 57771) The commenter 
argued that this allegedly was in contrast to the Federal crude oil 
rule which, the commenter asserted, allows no additional adjustments 
above transportation and quality.
    MMS believes there is no inconsistency between the pricing 
mechanism used by the small refiner program and the valuation 
requirements under the Federal crude oil rule. In both cases, if spot 
market index prices are used, adjustments for both location and quality 
are permitted, which account for the difference in value between the 
lease and the market center where the spot price is published. 
Accordingly, we believe the small refiner program and the Federal crude 
oil rule methodologies are consistent.

II. Procedural Matters

1. Summary Cost and Benefit Data

    This final rule eliminates the fee charged small refiners to 
recover the costs of administering the small refiner RIK program. This 
rule imposes the following costs and benefits to the four groups 
affected by MMS regulations: industry, state and local governments, 
Indian tribes and allottees, and the Federal Government. The cost and 
benefit information in this Item 1 of Procedural Matters is used as the 
basis for the Departmental certifications in Items 2-11.
A. Industry
    Small refiners will benefit from no longer paying an administrative 
fee (about $430,000 assessed across all active RIK contracts in 
calendar year 1999). However, small refiners will pay market value for 
RIK oil upfront rather than a typically lower price quoted by lessees 
upon removal from the lease and subsequently adjusted upward through 
audit. We believe that the combined financial impact of eliminating the 
fee while paying full market value for RIK oil will be a nominal 
revenue change to small refiners.
    Eliminating the administrative fee will provide small refiners 
certainty in the prices they will pay for royalty oil. Pricing 
certainty allows small refiners to anticipate revenues and expenses 
more accurately and better plan future business activities. This 
benefit is not quantifiable at this time.
B. State and Local Governments
    States are unaffected by the small refiner RIK program because they 
do not share in revenues accruing from Federal leases on the Outer 
Continental Shelf--the only leases participating in the program.
C. Indian Tribes and Allottees
    Indian tribes and allottees are unaffected by the small refiner RIK 
program because they do not share in revenues accruing from Federal 
leases on the Outer Continental Shelf--the only leases participating in 
the program.
D. Federal Government
    The U.S. Treasury General Fund will forego annual revenues of about 
$430,000--the administrative fee assessed across all active RIK 
contracts in calendar year 1999. However, with the changes to the RIK 
program that created the need for this rule, MMS will no longer have to 
rely on prices reported by third parties and impose separate cost 
recovery fees because we will receive full market value for our royalty 
oil. We believe that the combined financial impact of eliminating the 
fee while receiving full market value for RIK oil will be a nominal 
revenue change to the Federal Government.
    MMS will achieve administrative savings because we will no longer 
have to take action to collect additional monies owed by small refiners 
when subsequent audits show that prices quoted by lessees understated 
the oil's market value. This benefit is not quantifiable at this time.

2. Regulatory Planning and Review (Executive Order 12866)

    This document is not a significant rule and is not subject to 
review by the Office of Management and Budget under Executive Order 
12866.
    (1) This rule will not have an effect of $100 million or more on 
the economy. It will not adversely affect in a material way the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or state, local, or tribal governments or 
communities.
    (2) This rule will not create a serious inconsistency or otherwise 
interfere with an action taken or planned by another agency.
    (3) This rule does not alter the budgetary effects of entitlements, 
grants, user fees, or loan programs or the rights or obligations of 
their recipients.
    (4) This rule does not raise novel legal or policy issues.

3. Regulatory Flexibility Act

    The Department of the Interior certifies that this rule will not 
have a significant economic effect on a substantial number of small 
entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). 
See item 1. Summary Cost and Benefit Data, A. Industry, above for 
further information on the impact of this rule on small businesses. The 
small refiner RIK program had approximately five participants in 
calendar year 1999, all of which were small businesses as defined by 
the U.S. Small Business Administration. By participating in the small 
refiner RIK program, these refiners obtain noteworthy benefits that 
will not be reduced or changed by this rulemaking:
     Access to a crude oil marketplace where the major 
integrated oil companies and large refiners account for the majority of 
the crude oil traded;
     A stable source of supply at equitable market-based prices 
which helps the small refiner sustain operations at or near normal 
operating capacity; and
     A vital source of trade stock, thereby creating the 
opportunity to ``exchange'' royalty oil for the quality or

[[Page 28657]]

type of crude oil feed stock needed to sustain their mix of refined 
products.

4. Small Business Regulatory Enforcement Act (SBREFA)

    This rule is not a major rule under 5 U.S.C. 804(2), the Small 
Business Regulatory Enforcement Fairness Act. This rule:
    a. Does not have an annual effect on the economy of $100 million or 
more.
    b. Will not cause a major increase in costs or prices for 
consumers, individual industries, Federal, state, or local government 
agencies, or geographic regions.
    c. Does not have significant adverse effects on competition, 
employment, investment, productivity, innovation, or the ability of 
U.S.-based enterprises to compete with foreign-based enterprises.

5. Unfunded Mandates Reform Act

    This rule does not impose an unfunded mandate on state, local, or 
tribal governments or the private sector of more than $100 million per 
year. The rule does not have a significant or unique effect on State, 
local, or tribal governments or the private sector. A statement 
containing the information required by the Unfunded Mandates Reform Act 
(2 U.S.C. 1531 et seq.) is not required.

6. Takings (Executive Order 12630)

    In accordance with Executive Order 12630, this rule does not have 
significant takings implications. This rule does not impose conditions 
or limitations on the use of any private property; consequently, a 
takings implication assessment is not required.

7. Federalism (Executive Order 13132)

    In accordance with Executive Order 13132, this rule does not have 
Federalism implications. This rule does not substantially or directly 
affect the relationship between the Federal and state governments or 
impose costs on States or localities.

8. Civil Justice Reform (Executive Order 12988)

    In accordance with Executive Order 12988, the Office of the 
Solicitor has determined that this rule does not unduly burden the 
judicial system and meets the requirements of sections 3(a) and 3(b)(2) 
of the Order.

9. Paperwork Reduction Act of 1995

    This rule does not contain an information collection, as defined by 
the Paperwork Reduction Act, and the submission of Office of Management 
and Budget Form 83-I is not required.

10. National Environmental Policy Act

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

11. Consultation and Coordination with Indian Tribal Governments

    In accordance with Executive Order 13175, this rule does not have 
tribal implications that impose substantial direct compliance costs on 
Indian tribal governments.

List of Subjects in 30 CFR Part 208

    Continental shelf, Government contracts, Mineral royalties, Natural 
gas, Petroleum, Public lands-mineral resources.

    Dated: May 17, 2001.
Piet deWitt,
Acting Assistant Secretary, Land and Minerals Management.


    For the reasons set forth in the preamble, 30 CFR part 208 is 
amended as follows:

PART 208--SALE OF FEDERAL ROYALTY OIL

    1. The authority citation for part 208 continues to read as 
follows:

    Authority: 5 U.S.C. 301 et seq.; 30 U.S.C. 181 et seq., 351 et 
seq., 1701 et seq.; 31 U.S.C. 9701; 41 U.S.C. 601 et seq.; 43 U.S.C. 
1301 et seq., 1331 et seq., and 1801 et seq.


Sec. 208.4  [Amended]

    2. In Sec. 208.4, remove paragraph (b)(4).

[FR Doc. 01-13118 Filed 5-23-01; 8:45 am]
BILLING CODE 4310-MR-P