[Federal Register Volume 69, Number 84 (Friday, April 30, 2004)]
[Rules and Regulations]
[Pages 24052-24054]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-9862]



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Part VI





Department of the Interior





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Minerals Management Service



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30 CFR Part 203



Oil and Gas and Sulphur Operations in the Outer Continental Shelf--
Relief or Reduction in Royalty Rates--Deep Gas Provisions; Final Rule 
and Notice

  Federal Register / Vol. 69, No. 84 / Friday, April 30, 2004 / Rules 
and Regulations  

[[Page 24052]]


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DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 203

RIN 1010-AD01


Oil and Gas and Sulphur Operations in the Outer Continental 
Shelf--Relief or Reduction in Royalty Rates--Deep Gas Provisions

AGENCY: Minerals Management Service (MMS), Interior.

ACTION: Final rule--technical amendments.

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SUMMARY: The effective date of the final rule originally published 
January 26, 2004 (69 FR 3492) entitled ``Oil and Gas and Sulphur 
Operations in the Outer Continental Shelf--Relief or Reduction in 
Royalty Rates--Deep Gas Provisions'' (``January final rule''), with an 
effective date of March 1, 2004, is changed to May 3, 2004, to ensure 
compliance with the 60-day review period for final rules required by 
applicable statute. The January final rule will become effective May 3, 
2004. This final rule also promulgates related amendments to dates 
prescribed in the January final rule as originally published that 
follow from the change in the effective date.

DATES: The effective date of the rule published on January 26, 2004 (69 
FR 3492) is changed from March 1 to May 3, 2004. The changes published 
in this rule are effective on April 30, 2004.

FOR FURTHER INFORMATION CONTACT: Marshall Rose, Chief, Economics 
Division, Minerals Management Service, at (703) 787-1536. E-mail: 
[email protected]. Address: Minerals Management Service, MS 4050, 
381 Elden Street, Herndon, Virginia 20170.

SUPPLEMENTARY INFORMATION: The January final rule provided for (1) 
temporary incentives in the form of royalty suspension volumes for 
producing gas from certain deep wells (at least 15,000 feet true 
vertical depth below the datum at mean sea level (TVD SS)); (2) a 
royalty suspension supplement for drilling certain unsuccessful deep 
wells; and (3) price thresholds that may result in discontinuation of 
the royalty relief. The effective date of the January final rule as 
originally published was March 1, 2004.
    However, 5 U.S.C. 801(a)(1)(A) provides that before a rule can take 
effect, the Federal agency promulgating the rule must submit to each 
House of the Congress and to the Comptroller General a report 
containing a copy of the rule, a concise general statement relating to 
the rule, including whether it is a major rule, and the proposed 
effective date of the rule. Section 801(a)(3) then provides:

    (3) A major rule relating to a report submitted under paragraph 
(1) shall take effect on the latest of--
    (A) The later of the date occurring 60 days after the date on 
which--
    (i) The Congress receives the report submitted under paragraph 
(1); or
    (ii) The rule is published in the Federal Register, if so 
published.

The January final rule is a major rule under 5 U.S.C. 804(2) because it 
has an annual effect on the economy of $100 million or more. In the 
case of the January final rule, the Congress did not receive the rule 
until March 4, 2004. Therefore, the January final rule cannot become 
effective before May 3, 2004. As a consequence, gas produced from 
qualifying wells between March 1 and May 2, 2004, that would have been 
subject to a royalty suspension volume under the January final rule as 
published will not be subject to the royalty suspension provisions 
because the January final rule cannot take effect before May 3, 2004. 
This change does not require public comment under 5 U.S.C. 552(b)(3)(B) 
and is published as a final rule--technical amendments because the 
applicable statute compels changing the effective date to a date that 
complies with its terms.
    MMS recognizes that this is contrary to expectations of lessees who 
had based operational and investment decisions on the original 
effective date published in January 2004. The resulting inequity is 
addressed in a simultaneous notice published in the Federal Register 
today.
    The change in the effective date from March 1 to May 3, 2004, 
necessitates corresponding changes to various sections of the January 
final rule that refer to March 1, 2004, and other dates that are either 
3 months after that date or 5 years after that date. Each reference to 
March 1, 2004, in the January final rule is changed to May 3, 2004. 
Each reference to June 1, 2004, in the January final rule is changed to 
August 3, 2004. Each reference to March 1, 2009, in the January final 
rule is changed to May 3, 2009. These changes also do not require 
public comment under 5 U.S.C. 552(b)(3)(B) and are promulgated here as 
a final rule--technical amendments because they are a necessary 
consequence of the change in the effective date compelled by statute.
    Under 5 U.S.C. 552(b)(3)(B) and 5 U.S.C. 552(d)(3), MMS has 
determined for good cause that notice and public comment before making 
these technical amendments final is impracticable, unnecessary, or 
contrary to the public interest, and that good cause exists for making 
this rule immediately effective. As explained above, this final rule--
technical amendments corrects MMS's administrative error in failing to 
comply with 5 U.S.C. 801(a)(3).

Procedural Matters

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. As of mid-April, 2004, MMS has been 
notified of six qualified deep wells that are on production. They have 
an average well flow rate of 10 MMcf per day. MMS is aware of 16 others 
that are being drilled and could conceivably qualify and come onto 
production before May 3, 2004. Because of the high risk and startup 
time involved, we assume that only 3 of the 16 pending deep wells 
qualify and produce on average for one of the months covered by this 
rule. Thus, we estimate that about 6.5 Bcf might be produced by 
qualified wells between March and June, 2004 (with a somewhat lesser 
volume produced between March 1 and May 2, 2004). The associated 
royalty liability on the part of the lessees would total between $5 
million and $6 million (with a somewhat lesser amount for the period 
between March 1 and May 2, 2004), assuming a gas price of $5/Mcf.
    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.

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 corrects an administrative error.

[[Page 24053]]

    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. 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 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.
    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, 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 revisions do not contain any information collection 
requirements subject to the PRA. We will not submit a form OMB 83-I 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 
rule does not impose costs on States or localities. States and local 
governments play no part in the administration of the deep gas royalty 
relief program.

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.

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. A statement containing additional UMRA (2 
U.S.C. 1531 et seq.) information is not required.

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, MMS has determined that there 
are no effects from this action on Federally recognized Indian tribes.

List of Subjects for 30 CFR Part 203

    Continental shelf, Government contracts, Mineral Royalties, Oil and 
gas exploration, Public lands-mineral resources, Reporting 
requirements, Royalty suspension.

    Dated: April 26, 2004.
Patricia E. Morrison,
Acting Assistant Secretary--Land and Minerals Management.

0
For the reasons explained in the preamble, MMS amends 30 CFR part 203 
as follows:

PART 203--RELIEF OR REDUCTION IN ROYALTY RATES

0
1. The authority citation for Part 203 continues to read as follows:

    Authority: 25 U.S.C. 396 et seq.; 25 U.S.C. 396a et seq.; 25 
U.S.C. 2101 et seq.; 30 U.S.C. 181 et seq.; 30 U.S.C. 351 et seq.; 
30 U.S.C. 1001 et seq.; 30 U.S.C. 1701 et seq.; 31 U.S.C. 9701 et 
seq.; 43 U.S.C. 1301 et seq.; 43 U.S.C. 1331 et seq.; and 43 U.S.C. 
1801 et seq.


0
2. In Sec.  203.0, the introductory text and paragraph (1) of the 
definition of ``certified unsuccessful well'' and the definition of 
``qualified well'' are revised to read as follows:


Sec.  203.0  What definitions apply to this part?

* * * * *
    Certified unsuccessful well means an original well, or a sidetrack 
with a sidetrack measured depth of at least 10,000 feet, on your lease 
that:
    (1) You begin drilling on or after March 26, 2003, and before May 
3, 2009, and before your lease produces gas or oil from a deep well 
with a perforated interval the top of which is at least 18,000 feet 
true vertical depth below the datum at mean sea level (TVD SS);
* * * * *
    Qualified well means a deep well:
    (1) For which drilling begins on or after March 26, 2003;
    (2) That produces natural gas (other than test production), 
including gas associated with oil production, before May 3, 2009; and
    (3) For which you have met the requirements prescribed in Sec.  
203.43.
* * * * *

0
3. In Sec.  203.41, the first two sentences of paragraphs (b) and the 
first two sentences of paragraph (d) are revised to read as follows:


Sec.  203.41  If I have a qualified well, what royalty relief will my 
lease earn?

* * * * *
    (b) We will suspend royalties on gas volumes produced on or after 
May 3, 2004, reported on the Oil and Gas Operations Report, Part A 
(OGOR-A) for your lease under Sec.  216.53, as and to the extent 
prescribed in Sec.  203.42. All gas production from qualified wells 
reported on the OGOR-A, including production that is not subject to 
royalty (except for production to which a royalty suspension supplement 
under Sec. Sec.  203.44 and 203.45 applies), counts toward the lease 
royalty suspension volume.
* * * * *
    (d) We will suspend royalties on gas volumes produced on or after 
May 3, 2004, reported on the Oil and Gas Operations Report, Part A 
(OGOR-A) for your lease under Sec.  216.53, as and to the

[[Page 24054]]

extent prescribed in Sec.  203.42. All gas production from qualified 
wells reported on the OGOR-A, including production that is not subject 
to royalty (except for production to which a royalty suspension 
supplement under Sec. Sec.  203.44 and 203.45 applies), counts toward 
the lease royalty suspension volume.
* * * * *

0
4. In Sec.  203.42, paragraph (a)(1) and the introductory text of 
paragraph (b) are revised to read as follows:


Sec.  203.42  To which production do I apply the royalty suspension 
volume earned from qualified wells on my lease?

* * * * *
    (a)(1) Occurring on and after the later of May 3, 2004, or the date 
that the first qualified well that earns your lease the royalty 
suspension volume begins production (other than test production);
* * * * *
    (b) This paragraph applies to any lease all or part of which is 
within an MMS-approved unit. If your lease has a qualified well, a 
share of the production from all the qualified wells in the unit 
participating area will be allocated to your lease each month according 
to the participating area percentages. Subject to the requirements of 
Sec. Sec.  203.40, 203.41, 203.43, 203.44, and 203.47, you must apply 
the royalty suspension volume to the earliest gas production occurring 
on and after the later of May 3, 2004, or the date that the first 
qualified well that earns your lease the royalty suspension volume 
begins production (other than test production):
* * * * *

0
5. In Sec.  203.43, paragraph (d) and the introductory text of 
paragraph (e) are revised to read as follows:


Sec.  203.43  What administrative steps must I take to use the royalty 
suspension volume?

* * * * *
    (d) If you produced from a qualified well before May 3, 2004, you 
must provide the information in paragraph (b) of this section no later 
than August 3, 2004.
    (e) If you cannot produce from a well that otherwise meets the 
criteria for a qualified well before May 3, 2009, the MMS Regional 
Supervisor for Production and Development may extend the deadline for 
beginning production for up to 1 year, based on the circumstances of 
the particular well involved, provided you demonstrate that:
* * * * *

0
6. In Sec.  203.44, the first two sentences of paragraph (b) and the 
introductory text of paragraph (e) are revised to read as follows:


Sec.  203.44  If I drill a certified unsuccessful well, what royalty 
relief will my lease earn?

* * * * *
    (b) We will suspend royalties on oil and gas volumes produced on or 
after May 3, 2004, reported on the Oil and Gas Operations Report, Part 
A (OGOR-A) for your lease under Sec.  216.53, as and to the extent 
prescribed in Sec.  203.45. All oil and gas production reported on the 
OGOR-A, including production that is not subject to royalty (except for 
production to which a royalty suspension volume under Sec. Sec.  203.41 
and 203.42 applies), counts toward the lease royalty suspension 
supplement.
* * * * *
    (e) If the same wellbore that earns a royalty suspension supplement 
as a certified unsuccessful well later produces from a perforated 
interval the top of which is 15,000 feet TVD SS or deeper before May 3, 
2009, it will become a qualified well subject to the following 
conditions:
* * * * *

0
7. In Sec.  203.46, paragraph (c) is revised to read as follows:


Sec.  203.46  What administrative steps do I take to obtain and use the 
royalty suspension supplement?

* * * * *
    (c) If you commenced drilling a well that otherwise meets the 
criteria for a certified unsuccessful well on or after March 26, 2003, 
and finished it before May 3, 2004, provide the information in 
paragraph (b) of this section no later than August 3, 2004.
* * * * *

[FR Doc. 04-9862 Filed 4-29-04; 8:45 am]
BILLING CODE 4310-MR-P