[Federal Register Volume 68, Number 239 (Friday, December 12, 2003)]
[Rules and Regulations]
[Pages 69308-69312]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-30768]


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DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 250

RIN 1010-AC91


Oil and Gas and Sulphur Operations in the Outer Continental 
Shelf--Revision of Requirements Governing Outer Continental Shelf 
Rights-of-Use and Easement and Pipeline Rights-of-Way

AGENCY: Minerals Management Service (MMS), Interior.

ACTION: Final rule.

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

SUMMARY: MMS is modifying requirements governing rights-of-use and 
easements and pipeline rights-of-way on the Outer Continental Shelf 
(OCS). These changes will increase rental rates for pipeline rights-of-
way and establish rentals for rights-of-use and easements. This change 
is needed because of requests made by lessees and pipeline right-of-way 
holders to use large areas outside of the area covered by their lease 
and pipeline right-of-way for accessory structures. This rule will 
require holders of rights-of-use and easements and holders granted use 
of large areas as part of a pipeline right-of-way to pay rentals on a 
per acre basis.

EFFECTIVE DATE: This rule is effective January 12, 2004.

FOR FURTHER INFORMATION CONTACT: John Mirabella, Chief, Office of 
Offshore Regulations, (703) 787-1600.

SUPPLEMENTARY INFORMATION: Areas of the Gulf of Mexico (GOM) once 
thought beyond reach, located in water depths greater than 5,000 feet, 
are now being explored for development. A new generation of drillships 
and the development of new techniques allow drilling in waters as deep 
as 10,000 feet. Operators and pipeline right-of-way holders on the OCS 
are developing more sophisticated and cost-efficient technology that 
will lower the cost of safely finding, extracting, and delivering 
deepwater oil and natural gas.
    In the next decade, as industry moves further offshore into ultra-
deepwater frontiers, the number of floating production vessels will 
increase substantially. Structures such as tension-leg platforms and 
floating production and offloading systems will become widely used to 
produce oil and gas in the GOM. These systems must be stabilized above 
the seafloor in water depths of 1,000 to 10,000 feet and, therefore, 
require a mooring system that may have a ``footprint'' radius greater 
than 8,500 feet. In some cases, the mooring system may cover the 
majority of the OCS block on which the facility is positioned.
    Additionally, where the cost of producing directly from a 
production platform in deep water will allow operators to produce only 
large hydrocarbon discoveries from platforms, operators will produce 
smaller hydrocarbon discoveries in deep water by means of wells with 
production trees (the assemblage of valves) that are located on the 
ocean floor. These subsea systems must be tied back to a host facility 
by means of pipelines that deliver the production for processing and/or 
measurement, and cable-like control umbilicals that contain electrical 
conductors and small diameter steel tubing. Umbilicals allow control of 
the valves in the production tree and the measurement of pressure and 
temperature within the well to be accomplished remotely from the host 
facility (a platform that may not be on or near the lease).
    A right-of-use and easement or pipeline right-of-way grant allows 
lessees and pipeline right-of-way holders the freedom to optimize the 
placement of their facilities on unleased

[[Page 69309]]

OCS areas or areas under lease to other companies. Since the rights-of-
use and easements are of value to the recipient of the rights, MMS 
believes that it is equitable to charge for the rights at a per acre 
rate that is generally consistent with the rate paid by lessees. This 
rule establishes that charge for the rights conveyed.
    On April 24, 2003, MMS published a proposed rule to modify 30 CFR 
250.160, in subpart A, and 30 CFR 250.1009, in Subpart J, to allow MMS 
to charge an annual rental to compensate the United States for the use 
of areas outside of the company's lease and to change the rental amount 
charged to a pipeline right-of-way holder for accessories for the 
pipeline right-of-way. This rule applies to applicants for pipeline 
rights-of-way who request a site for accessories for the pipeline 
right-of-way, and to applicants who request use of an area that is not 
part of their lease (i.e., a right-of-use and easement). The rule 
covers new rights-of-use and easements and rights-of-way granted after 
the effective date of this rule and modifications to existing rights-
of-use and easements and rights-of-way when the modification is granted 
after the effective date of this rule. The rule includes a rental of $5 
per acre affected in water depths less than 200 meters and $7.50 per 
acre affected in water depths of 200 meters or greater. These rental 
rates correspond to the rental rates charged for leases in those water 
depths. The total annual rental depends on the size of the area 
requested, except that a minimum annual rental will be charged based on 
90 acres. Therefore, the minimum rental is $450 per year in water 
depths of less than 200 meters and $675 per year in water depths of 200 
meters or greater. Establishing the minimum charge based on 90 acres 
will ensure that the Federal Government receives sufficient payment to 
cover administrative costs.
    Existing regulations for pipeline right-of-way rentals allow for 
payment on an annual basis, for a 5-year period, or for multiples of 5 
years. This regulation retains these payment options for pipeline 
rights-of-way and establishes the same payment options for rights-of-
use and easements.
    Section 160 of Title 30 CFR is rewritten to add a table. Section 
1009 is separated and redesignated as Sections 1009 through 1014. 
Current Sections 1010 through 1014 are redesignated as Sections 1015 
through 1019. Redesignated Section 1012 is rewritten to add a table. 
The use of tables and the use of shorter sections with titles are 
intended to improve the clarity and readability of the regulation.
    The comment period following publication of the proposed rule ended 
on May 27, 2003. Five comment letters were received during the comment 
period. One letter from an oil and gas company protested the rule as 
being in conflict with other rules that provide a royalty suspension 
under certain circumstances. The company argued that this rule will 
reduce the effect of the royalty reduction. Of the other four letters, 
two were received from oil and gas companies, one from seven different 
associations representing the natural gas and oil industry, and one 
from a law student. These four letters all supported the proposed rule. 
The commentors supporting the rule cited the increasing need for large 
rights-of-use and easement in deep water and considered the proposed 
rentals reasonable.
    As mentioned above, one commentor argued that the fees established 
in the rule will reduce the effect of the royalty reduction. MMS 
believes that the increase in rental fees is appropriate because the 
purposes of these rentals and the purposes of royalty and royalty 
relief are very different and are unrelated. Royalty reduction provides 
major financial incentives to encourage specific actions such as deep 
water exploration that would not be undertaken under normal royalty 
obligations. This rule does not change that incentive. This rule simply 
establishes reasonable charges for companies choosing to use large 
areas of the OCS. Based on the majority of comments received, the 
rental fees being established are reasonable and will not discourage 
deep water exploration. In addition, lessees who receive deep-water 
royalty relief receive a financial benefit and incentive that is of a 
much greater magnitude than the amount of rentals owed under this rule.
    One comment letter supported the change in the regulation but 
expressed the opinion that the estimate of two requests per year for 
new or modified rights-of-use and easements is low. The opinion was 
based on an expectation that production of methane hydrates will 
require larger rights-of-use and easements. MMS recognizes the 
potential for production of methane hydrates and the possible need for 
rights-of-use and easements associated with that production. However, 
MMS does not agree that such activity will occur soon. The economic 
effects estimated for the proposed rule were based on projections for 
the next 5 years. MMS believes that the estimates used are a good 
estimate of the requests that will be received over the next 5 years.
    Commentors made no suggestions for revisions to the proposed 
regulation.
    In revised Section 250.1012(b), the proposed rule used the phrase 
``including fixed and floating platforms, subsea manifolds, and other 
similar structures'' to describe an accessory to a pipeline right-of-
way. The proposed phrase is different from the existing text of the 
regulation, which used the phrase ``including but not limited to a 
platform.'' No substantive change was intended. The final rule uses the 
original phrase to clarify that the rule changes the amount of the 
rental but does not change the criteria used to determine when a site 
will be considered an accessory to a pipeline right-of-way.

Procedural Matters

Regulatory Planning and Review (Executive Order 12866)

    This rule was determined by the Office of Management and Budget 
(OMB) to be significant and has been reviewed by OMB under Executive 
Order 12866.
    Over the next 5 years, in water depths 200 meters or greater, MMS 
anticipates that it will receive an average of two requests per year 
for a new or modified right-of-use and easement and an average of two 
requests per year for a new or modified pipeline right-of-way that 
includes an area for an accessory. These requests will be affected by 
this rule. Based on historical data, the estimated affected area per 
request in water depths 200 meters or greater will average 5,760 acres, 
which is the typical size of one OCS lease block. In these water 
depths, the new rule imposes a rental of $7.50 per acre affected. This 
equates to a total cost of $86,400 (5,760 x $7.50 x 2) for pipeline 
right-of-way applicants and $86,400 (5,760 x $7.50 x 2) for right-of-
use and easement applicants.
    Over the next 5 years, in water depths less than 200 meters, MMS 
anticipates, based on requests in recent years, that applicants will 
submit an average of 10 requests per year for a new right-of-use and 
easement and an average of two requests per year for a new or modified 
pipeline right-of-way that includes an area for an accessory. These 
requests will be affected by this rule. The estimated affected area per 
request in water depths less than 200 meters will average 90 acres. In 
these water depths, the new rule imposes a rental of $5 per acre 
affected. This equates to a total annual cost of $4,500 (90 x $5 x 10) 
for right-of-use and easement applicants and $900 (90 x $5 x 2) for 
pipeline right-of-way applicants.

[[Page 69310]]

    Under this scenario, the annual cost to industry for rentals will 
be $178,200 ($86,400 + $86,400 + $4,500 + $900).
    Since the current regulations provide for an annual rental of $75 
per site included in an application for pipeline rights-of-way 
accessories and no cost for right-of-use and easement applications, the 
total cost under current rules for these same activities is $300 per 
year for pipeline right-of-way applicants ($75 x 2 + $75 x 2) and no 
cost for right-of-use and easement applicants.
    (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. Issuance 
of a pipeline right-of-way or right-of-use and easement does not 
interfere with the ability of other agencies to exercise their 
authority.
    (3) This rule will 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 may raise novel legal or policy issues.

Regulatory Flexibility (RF) Act

    The Department 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 will affect lessees and holders of pipeline rights-of-way 
in 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, an estimated 70 percent of these companies are 
considered small. This rule, therefore, affects a substantial number of 
small entities.
    The companies that are considered small have an average of about 15 
offshore facilities. The small companies have estimated annual sales 
between $10 million and $40 million. As discussed earlier, the total 
annual cost to industry is estimated to be $178,800. No large or small 
company will bear a significant cost.
    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 actions of MMS, call 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:
    (a) Will 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) Will 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.
    This rule is not expected to have a significant effect because, as 
discussed under procedural matters, Regulatory Planning and Review 
(Executive Order 12866), this rule is estimated to have a total 
industry effect of $178,200 annually. This amount is not a significant 
effect for companies that do business on the OCS.

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 Part 250, Subparts A and J, refer to, but do not 
change, information collection requirements in current regulations. OMB 
has approved the referenced information collection requirements under 
OMB control numbers 1010-0114 for Subpart A, current expiration date of 
July 31, 2005; and 1010-0050 for Subpart J, current expiration date of 
January 31, 2006. The rule imposes no new paperwork 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 will not have 
Federalism implications. This rule will 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 will not affect that role.

Takings (Executive Order 12630)

    With respect to Executive Order 12630, the rule will 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 
the Office of Management and Budget under Executive Order 13211. The 
rule will not have a significant effect on energy supply, distribution, 
or use because payments to compensate the Federal Government for making 
resources unavailable for leasing will occur on the average less than 
one time a year. The costs due to increases in the rental rate will be 
very small compared with the costs of operating in the OCS. Thus, a 
Statement of Energy Effects is not required.

Civil Justice Reform (Executive Order 12988)

    With respect to Executive Order 12988, the Office of the Solicitor 
has determined that this rule will not unduly burden the judicial 
system and that it meets the requirements of Sections 3(a) and 3(b)(2) 
of the Executive Order.

National Environmental Policy Act (NEPA) of 1969

    This rule will not constitute a major Federal action significantly 
affecting the quality of the human environment. This rule will not 
affect the environmental regulations that a right-of-use and easement 
holder or a pipeline right-of-way holder will need to follow. A 
detailed statement under the NEPA is not required.

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

    This rule will not impose an unfunded mandate on State, local, or 
tribal governments or the private sector of more than $100 million per 
year. The rule will not have a significant or unique effect on State, 
local, or tribal

[[Page 69311]]

governments or the private sector. A statement containing the 
information required by the UMRA (2 U.S.C. 1531 et seq.) is not 
required. This is because the rule will not affect State, local, or 
tribal governments, and the effect on the private sector is small.

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: November 28, 2003.
Patricia E. Morrison,
Acting Assistant Secretary--Land and Minerals Management.

0
For the reasons stated in the preamble, the Minerals Management Service 
(MMS) amends 30 CFR Part 250 as follows:
0
1. The authority citation for part 250 continues to read as follows:

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


0
2. In Sec.  250.160, new paragraphs (f) through (i) are added to read 
as follows:


Sec.  250.160  When will MMS grant me a right-of-use and easement, and 
what requirements must I meet?

* * * * *
    (f) You must pay a fee as required by paragraph (g) of this section 
if:
    (1) You obtain a right-of-use and easement after January 12, 2004; 
or
    (2) You ask MMS to modify your right-of-use and easement to change 
the footprint of the associated platform, artificial island, or 
installation or device.
    (g) If you meet either of the conditions in paragraph (f) of this 
section, you must pay a fee to MMS as shown in the following table:

------------------------------------------------------------------------
               If...                               Then...
------------------------------------------------------------------------
(1) Your right-of-use and easement   You must pay a rental of $5 per
 site is located in water depths of   acre per year with a minimum of
 less than 200 meters;                $450 per year. The area subject to
                                      annual rental includes the areal
                                      extent of anchor chains, pipeline
                                      risers, and other equipment
                                      associated with the platform,
                                      artificial island, installation or
                                      device.
(2) Your right-of-use and easement   You must pay a rental of $7.50 per
 site is located in water depths of   acre per year with a minimum of
 200 meters or greater;               $675 per year. The area subject to
                                      annual rental includes the areal
                                      extent of anchor chains, pipeline
                                      risers, and other equipment
                                      associated with the platform,
                                      artificial island, or installation
                                      or device.
------------------------------------------------------------------------

    (h) You may make the rental payments required by paragraph (g)(1) 
and (g)(2) of this section on an annual basis, for a 5-year period, or 
for multiples of 5 years. You must make the first payment at the time 
you submit the right-of-use and easement application. You must make all 
subsequent payments before the respective time periods begin.
    (i) Late payments. An interest charge shall be assessed on unpaid 
and underpaid amounts from the date the amounts are due, in accordance 
with the provisions found in 30 CFR 218.54. If you fail to make a 
payment that is late after written notice from MMS, MMS may initiate 
cancellation of the right-of-use grant and easement under 30 CFR 
250.1009(d).

0
3. In Subpart J, Sec. Sec.  250.1009 through 250.1014 are redesignated 
as shown in the following table:

------------------------------------------------------------------------
   Current section and paragraph      Redesignated section and paragraph
------------------------------------------------------------------------
250.1009(a)(1).....................  250.1009(a).
250.1009(a)(2).....................  250.1009(b).
250.1009(b)(1).....................  250.1011(a).
250.1009(b)(1)(i)..................  250.1011(a)(1).
250.1009(b)(1)(ii).................  250.1011(a)(2).
250.1009(b)(2).....................  250.1011(b).
250.1009(b)(2)(i)..................  250.1011(b)(1).
250.1009(b)(2)(ii).................  250.1011(b)(2).
250.1009(b)(2)(iii)................  250.1011(b)(3).
250.1009(b)(3).....................  250.1011(c).
250.1009(b)(4).....................  250.1011(d).
250.1009(c) introductory text......  250.1010 introductory text.
250.1009(c)(1).....................  250.1010(a).
250.1009(c)(2).....................  250.1012.
250.1009(c)(3).....................  250.1010(b).
250.1009(c)(4).....................  250.1010(c).
250.1009(c)(5).....................  250.1010(d).
250.1009(c)(6).....................  250.1010(e).
250.1009(c)(7)(i)..................  250.1010(f)(1).
250.1009(c)(7)(ii).................  250.1010(f)(2).
250.1009(c)(7)(ii)(A)..............  250.1010(f)(2)(i).
250.1009(c)(7)(ii)(B)..............  250.1010(f)(2)(ii).
250.1009(c)(8).....................  250.1010(g).
250.1009(c)(9).....................  250.1010(h).
250.1009(d)........................  250.1013.
250.1009(e)........................  250.1014.
250.1010...........................  250.1015.
250.1011...........................  250.1016.
250.1012...........................  250.1017.
250.1013...........................  250.1018.

[[Page 69312]]

 
250.1014...........................  250.1019.
------------------------------------------------------------------------


0
4. The headings for newly redesignated Sec. Sec.  250.1010 through 
250.1014 are revised, and headings for newly redesignated Sec. Sec.  
250.1015 through 250.1019 are added to read as follows:


Sec.  250.1009  Requirements to obtain pipeline right-of-way grants.

* * * * *


Sec.  250.1010  General requirements for pipeline right-of-way holders.

* * * * *


Sec.  250.1011  Bond requirements for pipeline right-of-way holders.

* * * * *


Sec.  250.1012  Required payments for pipeline right-of-way holders.

* * * * *


Sec.  250.1013  Grounds for forfeiture of pipeline right-of-way grants.

* * * * *


Sec.  250.1014  When pipeline right-of-way grants expire.

* * * * *


Sec.  250.1015  Applications for pipeline right-of-way grants.

* * * * *


Sec.  250.1016  Granting pipeline rights-of-way.

* * * * *


Sec.  250.1017  Requirements for construction under pipeline right-of-
way grants.

* * * * *


Sec.  250.1018  Assignment of pipeline right-of-way grants.

* * * * *


Sec.  250.1019  Relinquishment of pipeline right-of-way grants.

* * * * *

0
5. Redesignated Sec.  250.1012 is revised to read as follows:


Sec.  250.1012  Required payments for pipeline right-of-way holders.

    (a) You must pay MMS an annual rental of $15 for each statute mile, 
or part of a statute mile, of the OCS that your pipeline right-of-way 
crosses.
    (b) This paragraph applies to you if you obtain a pipeline right-
of-way that includes a site for an accessory to the pipeline, including 
but not limited to a platform. This paragraph also applies if you apply 
to modify a right-of-way to change the site footprint. In either case, 
you must pay the amounts shown in the following table.

------------------------------------------------------------------------
               If...                               Then...
------------------------------------------------------------------------
(1) Your accessory site is located   You must pay a rental of $5 per
 in water depths of less than 200     acre per year with a minimum of
 meters;                              $450 per year. The area subject to
                                      annual rental includes the areal
                                      extent of anchor chains, pipeline
                                      risers, and other facilities and
                                      devices associated with the
                                      accessory.
(2) Your accessory site is located   You must pay a rental of $7.50 per
 in water depths of 200 meters or     acre per year with a minimum of
 greater;                             $675 per year. The area subject to
                                      annual rental includes the areal
                                      extent of anchor chains, pipeline
                                      risers, and other facilities and
                                      devices associated with the
                                      accessory.
------------------------------------------------------------------------

    (c) If you hold a pipeline right-of-way that includes a site for an 
accessory to your pipeline and you are not covered by paragraph (b) of 
this section, then you must pay MMS an annual rental of $75 for use of 
the affected area.
    (d) You may make the rental payments required by paragraphs (a), 
(b)(1), (b)(2), and (c) of this section on an annual basis, for a 5-
year period, or for multiples of 5 years. You must make the first 
payment at the time you submit the pipeline right-of-way application. 
You must make all subsequent payments before the respective time 
periods begin.
    (e) Late payments. An interest charge shall be assessed on unpaid 
and underpaid amounts from the date the amounts are due, in accordance 
with the provisions found in 30 CFR 218.54. If you fail to make a 
payment that is late after written notice from MMS, MMS may initiate 
cancellation of the right-of-use grant and easement under 30 CFR 
250.1009(d).
[FR Doc. 03-30768 Filed 12-11-03; 8:45 am]
BILLING CODE 4310-MR-P