[Federal Register Volume 67, Number 29 (Tuesday, February 12, 2002)]
[Proposed Rules]
[Pages 6454-6456]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-3275]


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DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 260

RIN 1010-AC94


Outer Continental Shelf Oil and Gas Leasing-Clarifying Amendments

AGENCY: Minerals Management Service (MMS), Interior.

ACTION: Proposed rule.

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SUMMARY: This document proposes clarifying amendments to regulations on 
Outer Continental Shelf (OCS) bidding systems. The proposed amendments 
make explicit that water depth and production timing on leases issued 
after 2000 and located in a field with leases issued earlier do not 
affect the way we determine the royalty suspension volume applicable to 
eligible leases on the field issued between 1996 and 2000.

DATES: We will consider all comments we receive by March 14, 2002. We 
will begin reviewing comments then and may not fully consider comments 
we receive after March 14, 2002.

ADDRESSES: If you wish to comment, you may mail or hand-carry comments 
to the Department of the Interior, Minerals Management Service; Mail 
Stop 4024; 381 Elden Street; Herndon, Virginia 20170-4817; Attention: 
Rules Processing Team. If you wish to e-mail comments, the e-mail 
address is: rules.commentsMMS.gov. Reference OCS Oil and Gas 
Leasing--Clarifying Amendments in your e-mail subject line. Include 
your name and return address in your e-mail message and mark your 
message for return receipt.

FOR FURTHER INFORMATION CONTACT: Marshall Rose, Economics Division, at 
(703) 787-1536.

SUPPLEMENTARY INFORMATION: On February 23, 2001, we published final 
regulations on OCS Oil and Gas Leasing (66 FR 11512). This rule 
proposes clarifying amendments to those regulations. The proposed minor 
changes to the final regulations that are the subject of these 
clarifying amendments affect persons acquiring or holding deepwater oil 
and gas leases under 43 U.S.C. 1337(a). As published, the final 
regulations did not explicitly address the way we determine the royalty 
suspension volume for a field of both eligible and royalty suspension 
(RS) leases when first production in the field comes from an RS lease. 
Eligible leases are leases we issued with a royalty suspension during 
the period 1996 to 2000, while RS leases are leases we issued after the 
year 2000 with a royalty suspension. Without this correction, a lessee 
may be able to control production timing on the eligible lease so as to 
try to increase the field's royalty suspension volume above the levels 
set by Congress in the Deep Water Royalty Relief Act (DWRRA).
    Our proposed clarification removes a half dozen restrictive words 
and adds a phrase to make explicit that water depth and production 
timing on an RS lease do not affect the way we determine the royalty 
suspension volume applicable to eligible leases in the same field. 
Specifically, we strike the phrase ``consisting only of eligible 
leases'' and add the phrase ``the water depths of eligible leases as 
in'' in Sec. 260.114(d), prior to the reference therein to 
Sec. 260.117(a), and by striking the word ``remaining'' in 
Sec. 260.124(b)(1). By removing the word ``remaining'' we mean that all 
the production on an RS lease, not just that occurring after an 
eligible lease starts production (and, thereby, establishes the field's 
royalty volume) counts as part of the field's royalty suspension 
volume. Thus, the royalty suspension volume for a field is determined 
solely by the circumstances of the eligible leases that are assigned to 
the field when first production occurs from an eligible lease. 
Moreover, any royalty suspensions applied to RS or other leases in the 
field count against that field's applicable suspension volume.
    For example, there are five eligible leases in a field and one RS 
lease. The RS lease has a royalty suspension volume of 10 million 
barrels of oil. The RS lease begins production first and goes through 
its royalty suspension volume. When an elgible lease begins to produce, 
the field has a royalty suspension volume of 87.5 million barrels. 
Because the RS lease has already taken its 10 million barrels of 
royalty suspension, the field now has a royalty suspension volume of 
77.5 million barrels.
    These clarifying amendments make this situation clear, so that 
there will be no reason to contest the suspension volume on the field.

Procedural Matters

Public Comment Procedure

    Our practice is to make comments, including names and home 
addresses of respondents, available for public review during regular 
business hours. Individual respondents may request that we withhold 
their home address from the record, which we will honor to the extent 
allowable by law. There may be circumstances in which we would withhold 
from the record a respondent's identity, as allowable by law. If you 
wish us to withhold your name and/or address, you must state this 
prominently at the beginning of your comment. We will not consider any 
anonymous comments. We will make all submissions from organizations or 
businesses, and from individuals identifying themselves as 
representatives or officials of organizations or businesses, available 
for public inspection in their entirety.

[[Page 6455]]

Regulatory Planning and Review (Executive Order 12866)

    According to the criteria in Executive Order 12866, this rule is 
not a significant regulatory action. The Office of Management and 
Budget (OMB) makes the final determination under Executive Order 12866.
    a. This rule will not have an annual economic effect of $100 
million or adversely affect an economic sector, jobs, the environment 
or other units of government. This action avoids confusion and possible 
conflict in the rare situation when a deepwater RS lease, that happens 
to be in a field with deepwater eligible leases, is the first lease to 
produce in the field. This event should be rare because the eligible 
leases pre-date the RS lease, meaning the eligible leases were deemed 
the better prospect and their owners have had more time to explore and 
develop their potential. Further, the royalty status only of production 
that occurs probably 10 or more years after start of production on the 
field would be affected by this rare event because of the large size of 
the field suspension volumes relative to annual production on typical 
leases. Finally, any royalty-free production shifted from the eligible 
leases to the RS lease on the one or two fields where this event may 
occur would total only about $20 to $30 million, only a portion of 
which would occur in any one year.
    b. This rule will not create inconsistencies with other agencies' 
actions because there are no changes in requirements from the existing 
rule.
    c. This rule is an administrative change that will not affect 
entitlements, grants, user fees, loan programs, or their recipients. 
This rule has no effect on these programs or rights of the programs' 
recipients.
    d. This rule will not raise novel legal or policy issues. This 
action protects the original intent of the DWRRA, should a rare and 
unlikely situation arise. We propose to handle this situation in a 
manner that is parallel to our established treatment of the same field 
when the normal situation of the eligible lease starting producing 
first occurs.

Regulatory Flexibility (RF) Act

    The Department certifies that this document will not have a 
significant economic effect on a substantial number of small entities 
under the RF Act (5 U.S.C. 601 et seq.). The provisions of this rule 
will not have a significant economic effect on offshore lessees and 
operators, including those that are classified as small businesses. The 
rule will limit automatic royalty relief to deepwater fields to the 
amount established by the DWRRA, regardless of the water depth and 
production timing of RS leases on the field. New regulatory provisions 
will rarely apply and when they do will affect firms, large and small, 
the same way. Firm size should have no effect on whether RS or eligible 
leases on the same field start production first.
    Your comments are important. The Small Business and Agriculture 
Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards were 
established to receive comments from small businesses about Federal 
agency enforcement actions. The Ombudsman will annually evaluate the 
enforcement activities and rate each agency's responsiveness to small 
business. If you wish to comment on the enforcement actions of MMS, 
call toll-free (888) 734-3247.

Small Business Regulatory Enforcement Fairness Act (SBREFA)

    This rule is not a major rule under 5 U.S.C. 804(2), the SBREFA. 
This rule:
    a. Does not have an annual effect on the economy of $100 million or 
more. The proposed rule closes a possible loophole, the use of which 
may never be attempted. Even if a situation were to arise where this 
provision applies, the amount of royalties involved is a small fraction 
of $100 million.
    b. Will not cause a major increase in costs or prices for 
consumers, individual industries, Federal, State, or local government 
agencies, or geographic regions. Oil prices are not based on the 
production from any one region, but are based on worldwide production 
and demand at any point in time. While gas prices are more localized, 
they correlate to oil prices. The rule does not change any existing 
leasing policies, so it should not cause prices to increase.
    c. Does not have significant adverse effects on competition, 
employment, investment, innovation, or the ability of United States-
based enterprises to compete with foreign-based enterprises. Leasing on 
the United States OCS is limited to residents of the United States or 
companies incorporated in the United States. This rule does not change 
that requirement, so it does not change the ability of United States 
firms to compete in any way.

Paperwork Reduction Act (PRA)

    The proposed revisions do not contain any information collection 
subject to the PRA and do not require a form OMB 83-I be submitted to 
OMB for review and approval under section 3507(d) of the PRA.

Federalism (Executive Order 13132)

    According to Executive Order 13132, this rule does not have 
Federalism implications. This rule does not substantially and directly 
affect the relationship between the Federal and State Governments. This 
proposal may affect the collection of royalty revenues from lessees in 
the deepwater Gulf of Mexico, all of which is outside State 
jurisdiction. States have no role in this activity with or without this 
rule. This rule does not impose costs on States or localities. States 
and local governments play no part in the administration of the 
deepwater royalty relief programs.

Takings Implications Assessment (Executive Order 12630)

    According to Executive Order 12630, the rule does not have 
significant Takings implications. A Takings Implication Assessment is 
not required because the rule would not take away or restrict a bidders 
right to acquire OCS leases.

Energy Supply, Distribution, or Use (Executive Order 13211)

    This rule is not a significant rule and is not subject to review by 
OMB under Executive Order 12866. This clarification rule does not have 
a significant effect on energy supply, distribution, or use because it 
reduces uncertainty in a rare circumstance relating to the order of 
drilling of different vintages of leases on a deepwater field having 
royalty relief. Greater certainty about how a particular sequence of 
drilling affects both the field's and leases' applicable royalty 
suspension volumes serves to focus lessee effort towards solving 
development and production challenges rather than to contesting the 
ultimate size of an already generous royalty suspension volume awarded 
to them.

Unfunded Mandates Reform Act (UMRA)

    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. The rule describes the policies for OCS 
leases issued with different royalty suspension amounts that happen to 
be on the same field. A statement containing additional UMRA (2 U.S.C. 
1531 et seq.) information is not required.

[[Page 6456]]

Civil Justice Reform (Executive Order 12988)

    According to 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.

National Environmental Policy Act (NEPA) of 1969

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

Government-to-Government Relationship With Tribes

    According to the President's memorandum of April 29, 1994, 
``Government-to-Government Relations with Native American Tribal 
Governments'' (59 FR 22951) and 512 DM 2, we have determined that there 
are no effects from this action on federally recognized Indian tribes.

Civil Justice Reform (Executive Order 12988)

    According to 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 section 3(a) and 3(b)(2) of the Order.

National Environmental Policy Act (NEPA) of 1969

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

Government-to-Government Relationship With Tribes

    According to the President's memorandum of April 29, 1994, 
``Government-to-Government Relations with Native American Tribal 
Governments'' (59 FR 22951) and 512 DM 2, we have determined that there 
are no effects from this action on federally recognized Indian tribes.

List of Subjects in 30 CFR Part 260

    Bidding system, Continental shelf, Oil and gas leasing, Reporting 
requirements, Restricted joint bidder, Royalty suspension.

    Dated: January 30, 2002.
James E. Cason,
Acting Deputy Secretary.
    For the reasons stated in the preamble, the Minerals Management 
Service (MMS) proposes to amend 30 CFR part 260 as follows:

PART 260--OUTER CONTINENTAL SHELF OIL AND GAS LEASING

    1. The authority citation for part 260 continues to read as 
follows:

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

    2. In Sec. 260.114, paragraph (d) is revised to read as follows:


Sec. 260.114  How does MMS assign and monitor royalty suspension 
volumes for eligible leases?

* * * * *
    (d) When production (other than test production) first occurs from 
any of the eligible leases in a field, we will determine what royalty 
suspension volume applies to the lease(s) in that field. We base the 
determination for eligible lease(s) on the royalty suspension volumes 
specified in paragraph (b) of this section and the water depths of 
eligible leases specified in Sec. 260.117(a).
* * * * *
    3. In Sec. 260.124, paragraph (b)(1) is revised to read as follows:


Sec. 260.124  How will royalty suspension apply if MMS assigns a lease 
issued in a sale held after November 2000 to a field that has an 
eligible or pre-Act lease?

* * * * *
    (b) * * *
    (1) Royalty-free production from your RS lease shares from and 
counts as part of any royalty suspension volume under Sec. 260.114(d) 
for the field to which we assign your lease; and
* * * * *

[FR Doc. 02-3275 Filed 2-11-02; 8:45 am]
BILLING CODE 4310-MR-P