[Federal Register Volume 67, Number 127 (Tuesday, July 2, 2002)]
[Rules and Regulations]
[Pages 44357-44360]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-16633]


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DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 250

RIN 1010-AC92


Oil and Gas and Sulphur Operations on the Outer Continental 
Shelf--Suspension of Operations for Exploration Under Salt Sheets

AGENCY: Minerals Management Service (MMS), Interior.

ACTION: Final rule.

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SUMMARY: MMS is modifying regulations that govern suspensions of 
operations for oil and gas leases on the Outer Continental Shelf (OCS). 
The amendment covers instances where oil and gas lessees begin timely 
interpretation of geophysical data early in the lease term, but the 
analysis proves inconclusive because of problems caused by the 
existence of salt sheets underlying the seabed and overlying possible 
hydrocarbon deposits. In such cases, the rule allows lessees to apply 
for a suspension of operations to complete the necessary geophysical 
interpretation before drilling a well. To qualify for a suspension of 
operations, the lessee must show it has made and will continue to make 
substantial efforts and financial commitment to process and reprocess 
its geophysical data.

DATES: This rule is effective August 1, 2002.

FOR FURTHER INFORMATION CONTACT: John Mirabella, Engineering and 
Operations Division, (703) 787-1598.

SUPPLEMENTARY INFORMATION: When a lessee obtains an oil and gas lease 
on the OCS, MMS regulations allow the lessee flexibility to schedule 
activities during the primary term. At the end of the primary term, the 
lease can continue in force only by production, suspension, drilling, 
or well reworking operations as approved by the Secretary of the 
Interior. MMS regulations at 30 CFR 250.168-177 authorize suspensions 
before discovery of oil or gas in paying quantities only in limited 
circumstances. Generally, when a lease reaches the end of the primary 
term, the lessee must conduct drilling operations until it has made a 
discovery of oil or gas and a commitment to proceed to development and 
production.
    Although lessees have made great progress in imaging potential 
objectives in areas under salt sheets, processing, analyzing, and 
interpreting geophysical, geological, and other relevant data and 
information is complex and time-consuming. As a result, lessees have 
been faced with the end-of-lease-term decisions to either allow the 
lease to expire or drill a well without sufficient geophysical 
information.
    On December 21, 2000, MMS issued a Notice to Lessees (NTL) 2000-
G22, Subsalt Lease Term Extension. That NTL provides for an extension 
of lease terms for subsalt exploration in cases where the lessee has 
drilled a well on the lease during the primary term but needs 
additional time to process geophysical data before drilling another 
well. The NTL did not provide additional time to process geophysical 
data in cases where a well had not been drilled. This rule authorizes 
MMS to grant a suspension for a lease when the operator has conducted 
timely analysis and interpretation of the geophysical data that may 
ultimately lead to a drilling objective but, due to the complexity of 
the salt sheet, needs additional time to complete the geophysical 
analysis before drilling.
    MMS published a proposed rule on January 9, 2002 (67 FR 1171). The 
public comment period ended on February 8, 2002. Seven interested 
parties responded with comments and recommendations during the comment 
period. Commenters agreed with the need to encourage drilling in areas 
under salt sheets and supported the change, although they made specific 
recommendations about the rule and its implementation.
    Comments: One commenter noted that the effect of the regulation 
will delay the commencement of drilling on the lease. He asked that MMS 
closely scrutinize requests made under the rule to ensure that lessees 
are diligently working toward drilling activities.
    Response: We agree with the commenter that this rule should be

[[Page 44358]]

applied only to the limited set of circumstances detailed in the rule, 
with the ultimate goal being development of the lease. It is for this 
reason that the provision includes specific details with regard to 
eligibility and diligence.
    Comments: One commenter encouraged MMS to establish a 10-year lease 
term for all leases in the Gulf of Mexico (GOM). The rationale given 
was that capital commitment and technical complexities warrant a 10-
year lease. Another commenter requested consideration of broader 
changes in leasehold management, lease term extension, and unit 
formation. The rationale was that the changes are needed to tap the 
vast potential in the GOM.
    Response: The MMS appreciates the concerns expressed by all 
commenters. However, these comments are outside the scope of this 
rulemaking and were not adopted.
    Comments: Several commenters were uncertain of the definition of 
the western GOM and others recommended that the rule apply to the 
entire OCS, not just to the western GOM. Since granting of a suspension 
of operations is discretionary, the commenter thought that limiting the 
rule to one geographical area was unnecessary.
    Response: To avoid confusion and to provide the discretion needed 
to avoid premature drilling of wells if these conditions were found to 
exist in other areas, we have removed the clause limiting the rule to 
the western GOM.
    Comments: One commenter recommended that the suspension not be 
limited to 3 years. Another commenter recommended that the provision 
clarify that a lessee can receive more than one suspension on a lease.
    Response: Lessees who apply for a suspension will be required to 
specify the activities leading to the drilling of a subsalt well and, 
if the suspension is granted, it will be for a length of time warranted 
to complete specified activities. If in the course of completing the 
specified work, the lessee encounters further complications and needs 
additional time, the lessee may apply for additional suspensions under 
the provision. MMS expects that a suspension of even 3 years will be 
very unusual. However, since we will only be giving the time necessary 
to complete the proposed activity, we have eliminated the 3-year 
maximum and will determine the appropriate length of suspensions on a 
case-by-case basis. When not otherwise specified, suspensions under MMS 
regulations are for a maximum of 5 years as specified in 30 CFR 
250.170(a) and can be obtained multiple times when warranted.
    Comment: One commenter recommended that the rule apply to a variety 
of salt structures other than salt sheets.
    Response: We did not make this change. Companies have historically 
operated near salt structures, and it is not our intention to provide 
more time for all companies who find potential discoveries near a salt 
structure. This provision is intended to specifically address the needs 
of companies who are exploring in deep areas under or near a salt 
sheet.
    Comments: Several commenters made recommendations concerning the 
specific wording of the proposed rule. In Sec. 250.175(b)(2), one 
commenter recommended that ``collected'' be changed to ``acquired'' to 
recognize that some lessees will be purchasing or licensing rather than 
collecting data and that ``analyzed'' be changed to ``interpreted'' to 
be more representative of the work. Another commenter recommended that 
the rule be modified to clarify that the provision applies to leases 
already beyond the third year. The commenter read the rule to imply 
that leases beyond their third year when the rule becomes effective 
will not be eligible for a suspension under the new provision.
    Response: Any lessee will be eligible to apply for a suspension 
under the new provision. We revised the wording from ``collected'' to 
`` acquired'' and replaced ``analyzed'' with ``interpreted.'' All 
lessees who hold leases that meet the requirements of the provision and 
are active at the time this rule becomes effective, or are issued after 
that date, will be eligible to apply for the suspension.
    Comment: One commenter recommended that the 3-year period in 
Sec. 250.175(b)(2), during which lessees must complete specified 
geophysical work, be lengthened by the length of any suspensions of 
operations received during the 3 years.
    Response: In rare cases where a suspension is directed within the 
first 3 years of a primary term, the suspension would not be expected 
to require the lessee to delay geophysical work. We therefore have not 
adopted the commenter's suggestion.
    Comments: Several commenters made recommendations concerning the 
discussion of Sec. 250.175(b)(3) in the preamble to the proposed rule 
which stated that as a measure of whether the lessee has conducted 
timely analysis of geophysical information, MMS will require the lessee 
to have collected and analyzed geophysical information (i.e., full 3-D 
depth migration beneath the salt sheet and over the entire lease area) 
before the end of the third lease year. The commenters stated that 
either (1) 3-D ``time'' migration, rather than depth migration, be 
acceptable as the seismic activity reasonably expected to have been 
concluded with the first 3 years of the lease term; or (2) the lessee 
commit financially (by contract) to perform a depth migration before 
the end of the third year. The preamble also stated that the lessee 
must have completed additional data reprocessing before MMS will grant 
a suspension. The commenters wanted more time to complete the pre-stack 
depth migration because conducting the interpretations prematurely 
would limit the information that would be gained from the depth 
migration.
    Response: We did not accept this suggested change. Prior to 
encountering complications due to the salt sheet, the lessee should be 
on a schedule to drill in the primary term. The complications being 
addressed by this rule would not be apparent until after the lessee has 
completed the depth migration. If the lessee is not on a schedule to 
complete the depth migration by the end of the third year, then our 
experience has shown that the schedule would not provide for drilling 
during a 5-year primary term. In considering whether the interpretation 
of geophysical information is timely, MMS will require the lessee to 
have acquired and interpreted geophysical information (i.e., full 3-D 
depth migration beneath the salt sheet and over the entire lease area) 
before the end of the third lease year. This is consistent with the 
criteria included in the preamble to the proposed rule, and this 
criterion has been included in the final rule at Sec. 250.175(b)(3).
    Comment: A commenter recommended that because of the uncertainty of 
contractor availability, the criteria for timely analysis be that the 
lessee had issued a contract for depth migration rather than to have 
completed the depth migration by the end of the third year.
    Response: MMS did not make this change. Contractors conduct a 
significant portion of OCS operations. Whether the work is drilling a 
well or conducting geophysical exploration, the lessee is ultimately 
responsible for the timeliness of the contractor's activities.
    Comment: In Sec. 250.175(b)(3), commenters recommended that the 
word ``confirms'' be changed to ``indicates'' to better reflect the 
geophysical phase of exploration and the term ``beneath the salt 
sheet'' be modified to recognize that a drillable

[[Page 44359]]

objective may not be entirely under the salt sheet.
    Response: We revised the final rule to reflect these 
recommendations, which are found in Sec. 250.175(b)(2).
    Comments: In Sec. 250.175(b)(4), commenters recommended changing 
``completing'' to ``completing or nearing the completion of'' to not 
penalize a company who is diligent but has not completed a specific 
interpretation, and adding ``covering all or a portion of the 
applicable geophysical area'' to allow the lessee to concentrate on 
special areas of interest.
    Response: We revised the final rule to address these 
recommendations and to place the emphasis on the information that 
justifies the application.
    Comment: One commenter recommended that Sec. 250.175(b)(5) be 
changed to allow time to determine the best location to drill and to 
plan the well.
    Response: MMS recognizes that determining the best location to 
drill and planning the well are necessary steps to be taken prior to 
drilling. If a lessee meets the conditions necessary to receive a 
suspension of operations, the lessee, in accordance with 
Sec. 250.171(b), will submit a request that includes a schedule of 
activities leading up to commencement or restoration of the suspended 
activity. In this case, the lessee would include a schedule leading up 
to the commencement of drilling. If that schedule includes a reasonable 
length of time for determining a location to drill and planning the 
well, then the length of the suspension will, if granted, include time 
for those activities.
    In Sec. 250.175(b)(5), the text was revised to reflect changes made 
in other paragraphs.

Procedural Matters

Regulatory Planning and Review (Executive Order 12866)

    This document is not a significant rule as determined by the Office 
of Management and Budget (OMB) and is not subject to review under 
Executive Order 12866.
    Over the next 5 years, MMS anticipates that companies would make 
three to five requests each year under the rule. We estimate that in 
three of the cases each year, this new rule will prevent unnecessary 
drilling of wells that may not otherwise have been drilled had the 
geophysical interpretation been sufficient. Depending on the water 
depth and the well depth, we estimate that drilling each well, on 
average, would have cost $10 million. Selective suspensions will help 
reduce potential environmental impact and produce approximately $30 
million in private sector savings.
    (1) This rule will not have an annual 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. Issuance 
of a suspension for a lease does not interfere with the ability of 
other agencies to exercise their authority.
    (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. This rule will have no effect on the rights of the 
recipients of entitlements, grants, user fees, or loan programs.
    (4) This rule does not raise novel legal or policy issues.

Regulatory Flexibility (RF) Act

    The Department of the Interior (DOI) certifies that this rule 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.).
    This rule may directly or indirectly affect lessees and operators 
of leases on the OCS. This includes about 130 different companies. 
These companies are generally classified under the North American 
Industry Classification System (NAICS) code 211111, which includes 
companies that extract crude petroleum and natural gas. For this NAICS 
code classification, a small company is one with fewer than 500 
employees. Based on these criteria, we estimate that about 70 percent 
of these companies are considered small. We expect few, if any, of the 
small companies to apply for a suspension under this rule. This is 
because the wells that will be drilled into the subsalt areas are 
expected to be drilled to depths sometimes in excess of 30,000 feet. 
These wells will be substantially more expensive than the average well 
on the OCS. As stated earlier, the costs of the wells are expected to 
average $10 million. Some small companies may benefit by being included 
in partnerships with larger companies that are exploring in the subsalt 
areas.
    Your comments are important. The Small Business and Agriculture 
Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards were 
established to receive comments from small business 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 1-888-734-3247. You may comment to the Small Business 
Administration without fear of retaliation. Disciplinary action for 
retaliation by an MMS employee may include suspension or termination 
from employment with the Department of the Interior.

Small Business Regulatory Enforcement Fairness Act (SBREFA)

    This rule is not a major rule under the SBREFA (5 U.S.C. 804(2)). 
This rule:
    (1) Does not have an annual effect on the economy of $100 million 
or more.
    (2) Will not cause a major increase in costs or prices for 
consumers, individual industries, Federal, State, or local government 
agencies, or geographic regions.
    (3) Does not have significant adverse effects on competition, 
employment, investment, productivity, innovation, or the ability of 
United States-based enterprises to compete with foreign-based 
enterprises.
    We do not expect this rule to have a significant effect because, as 
discussed above, this rule will have a positive effect on the private 
sector of approximately $30 million per year in avoided costs.

Paperwork Reduction Act (PRA) of 1995

    The PRA provides that an agency may not conduct or sponsor a 
collection of information unless it displays a currently valid OMB 
control number. Until OMB approves a collection of information and 
assigns a control number, you are not required to respond. The 
revisions to 30 CFR 250, subpart A, refer to, but do not change the 
information collection requirements in the current regulations. OMB has 
approved the referenced information collection requirements under OMB 
control number 1010-0114, current expiration date of September 30, 
2002. The rule includes no new reporting or recordkeeping requirements, 
and an OMB form 83-I submission to OMB under the PRA is not required.

Federalism (Executive Order 13132)

    With respect to Executive Order 13132, the rule does not have 
Federalism implications. This rule does not substantially and directly 
affect the relationship between the Federal and State governments. To 
the extent that State and local governments have a role in OCS 
activities, this rule does not affect that role.

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Takings (Executive Order 12630)

    With respect to Executive Order 12630, the rule does not have 
significant Takings implications. A Takings Implication Assessment is 
not required. The rulemaking is not a governmental action capable of 
interfering with constitutionally protected property rights.

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. The rule may have a small positive 
effect on energy supplies.

Civil Justice Reform (Executive Order 12988)

    With respect 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 
Executive 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. The DOI has established 
that ``issuance and/or modification of regulations'' is considered a 
categorically excluded action, as it results only in administrative 
effects causing no significant impacts on the environment. Therefore, 
this action will not require preparation of an environmental assessment 
or impact statement. MMS has determined that this action does not 
represent an exception to the categorical exclusion. A detailed 
statement under NEPA is not required.

Unfunded Mandate Reform Act (UMRA) of 1995 (Executive Order 12866)

    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 UMRA (2 U.S.C. 1531 et seq.) 
is not required.

List of Subjects in 30 CFR Part 250

    Continental shelf, Environmental impact statements, Environmental 
protection, Government contracts, Investigations, Mineral royalties, 
Oil and gas development and production, Oil and gas exploration, Oil 
and gas reserves, Penalties, Pipelines, Public lands-mineral resources, 
Public lands--right-of-way, Reporting and recordkeeping requirements, 
Sulphur development and production, Sulphur exploration, Surety bonds.

    Dated: June 20, 2002.
Rebecca W. Watson,
Assistant Secretary, Land and Minerals Management.

    For the reasons stated in the preamble, the Minerals Management 
Service amends 30 CFR part 250 as follows:

PART 250--OIL AND GAS AND SULPHUR OPERATIONS IN THE OUTER 
CONTINENTAL SHELF

    1. The authority citation for part 250 continues to read as 
follows:

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


    2. In Sec. 250.175, redesignate the existing text as paragraph (a) 
and add a new paragraph (b) to read as follows:


Sec. 250.175  When may the Regional Supervisor grant an SOO?

* * * * *
    (b) The Regional Supervisor may grant an SOO when all of the 
following conditions are met:
    (1) The lease was issued with a primary lease term of 5 years, or 
with a primary term of 8 years with a requirement to drill within 5 
years;
    (2) Before the end of the third year of the primary term, you or 
your predecessor in interest must have acquired and interpreted 
geophysical information that indicates:
    (i) The presence of a salt sheet;
    (ii) That all or a portion of a potential hydrocarbon-bearing 
formation may lie beneath or adjacent to the salt sheet; and
    (iii) The salt sheet interferes with identification of the 
potential hydrocarbon-bearing formation.
    (3) The geologic information required under paragraph (b)(2) of 
this section must include full 3-D depth migration beneath the salt 
sheet and over the entire lease area.
    (4) Before requesting the suspension, you have conducted or are 
conducting additional data processing or interpretation of the 
geophysical information with the objective of identifying a potential 
hydrocarbon-bearing formation.
    (5) You demonstrate that additional time is necessary to:
    (i) complete current processing or interpretation of existing 
geophysical data or information;
    (ii) acquire, process, or interpret new geophysical data or 
information; or
    (iii) drill into the potential hydrocarbon-bearing formation 
identified as a result of the activities conducted in paragraphs 
(b)(2), (b)(4), and (b)(5) of this section.

[FR Doc. 02-16633 Filed 7-1-02; 8:45 am]
BILLING CODE 4310-MR-P